When Do You Stop Paying Social Security Tax?
Nashua, NH Residents Looks for Answers
Social Security taxes are taken out of an employee’s paycheck in the form of FICA (Federal Insurance Contributions Act). This tax covers both Social Security and Medicare. In general, everyone working and earning a paycheck will need to pay this tax. Very high earners will max out their Social Security contribution before the end of the year, only to have it resume after the new calendar year. The maximum taxable wage for 2022 is $147,000. Any income in excess of this will not have the FICA tax withheld.
A Nashua resident was curious if there would ever come a time when he was “done” paying Social Security tax. He contacted the experts at Merrimack Tax Associates for advice.
Taxable Wage Base
The taxable wage base is the maximum amount of earned income that a taxpayer must pay Social Security tax on. This number fluctuates from year to year as dictated by the IRS. Any money earned in excess of this will be exempt from FICA, allowing the taxpayer to hold on to the extra 6.2% of income that normally goes to this tax.
Other Exemptions for Social Security Tax
Members of some religious groups that have been in existence since 1950 and have opted out of receiving the benefits that go along with Social Security are exempt from paying this tax. Federal employees who started their job prior to 1984 are covered under CSRS (Civil Service Retirement System) and are not required to pay Social Security tax. However, they will not receive Social Security benefits. Some state and government workers that are covered solely under a pension plan are also not required to pay Social Security tax.
For most workers, paying Social Security tax for the entirety of your working career is a given. The exemption is for those that will not receive benefits under the program. The resident in Nashua now has a better understanding of how the Social Security tax works and what he can expect in the future.