On a maximum pay base of $160,200, the Social Security tax percentage will be 12.4% in 2023. The tax amount will be split equally between employers and workers. People who are their own bosses are responsible for both the employee and employer shares of Social Security tax; however, only on the first 92.35 percent of their business's net profits.
What are the Functions of the Security Tax?
Employees and self-employed individuals both must pay Social Security tax on their earnings.
In 2023, the tax rate for Social Security will be 12.4%. The employer is liable for paying half of the tax (6.2%), while the worker is obligated to pay the other half. Salary and bonus income are all subject to Social Security tax at the same rate.
Typically, employers will deduct this fee from their workers' paychecks and remit the funds to the appropriate authorities. The money that workers contribute to Social Security is not set aside for the benefit of those workers; instead, it is used to compensate those who have already retired. Survivorship payments are provided to the spouse or dependent child of a deceased worker by Social Security after the worker's death.
What are the Exemptions from the Social Security Tax?
The Social Security tax is not required of all taxpayers. Exemptions are provided for the following categories of people:
Nonresident aliens, i.e., those who are neither U.S. citizens nor lawful permanent residents, who are in the nation temporarily as students.
Individuals of a religious organization who are against obtaining Social Security payments upon retirement, disability, or death.
Students who really are working in the same institution where they are studying and whose work depends on ongoing enrollment.
Foreign governments that employ nonresident foreigners in the United States