Social Security Tax Rate Flashcards, test questions and answers

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What is Social Security Tax Rate?

Social Security tax is an important source of income for the federal government. It is the payroll taxes that are collected from both employers and employees. The amount of Social Security tax that each individual pays depends on their taxable wages, which can vary based on their income level.The current Social Security tax rate is 12.4%, with 6.2% paid by workers and 6.2% paid by employers (or self-employment tax). This rate has been in effect since 1990, and it applies to wages up to $128,400 (as of 2019). Employees who make more than this amount will not pay additional Social Security taxes on their earnings above the taxable wage limit. In addition to Social Security taxes, Medicare taxes are also withheld from employee wages at a rate of 2.9%. This means that employees now pay a total of 15.3% in payroll taxes each year, with 0.9% coming from Medicare and 14.4% coming from Social Security (6+2+6). Employers also pay an additional 1.45% towards Medicare as well as matching the employee’s contribution for Social Security at 6%. So overall, employers contribute 7+1= 8% towards this type of taxation while employees contribute 7+1= 8%. Overall, these combined payroll taxes provide a significant portion of funding for the federal government programs such as Social Security and Medicare benefits along with other social welfare programs and subsidies for lower-income individuals and families throughout the United States. The money generated through this taxation system helps fund many important aspects of our society such as healthcare costs for seniors, disability payments for those unable to work due to illness or injury, survivor benefits for families affected by death or divorce , unemployment insurance payments during times when jobs are scarce , as well as other benefit programs designed to help individuals struggling with poverty or financial hardship. By showing your support through paying your full share in payroll taxes each year you are helping ensure that generations to come will be able to receive all the benefits provided by these vital social security systems into retirement age .