Social Security
Federal retirement and disability program funded by payroll taxes.
Social Security is a federal program providing retirement, disability, and survivor benefits, funded by a 12.4% payroll tax split between employer and employee (6.2% each). The tax applies only to wages up to the annual wage base ($168,600 in 2024). Self-employed individuals pay both halves through self-employment tax. Social Security benefits at retirement are based on the 35 highest-earning years.
Example
An employee earning $100,000 pays $6,200 in Social Security tax (6.2%), and the employer matches with another $6,200, for a combined $12,400 contribution.
Why It Matters for Your Business
Social Security tax is a significant cost for both employers and employees, and understanding the wage base cap helps with compensation planning for high earners.
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