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Three ways to beat Social Security taxes Dreaming of a day the IRS will change its mind about taxing your Social Security is not so much magical as delusional thinking.
In 2021, workers and their employers each paid 6.2% Social Security withholding on the employee’s first $147,000 of income. Self-employed individuals pay the full 12.4%.
The Social Security Administration treats income before retirement age differently, depending on how close you are to your FRA: In the years before you reach FRA, the SSA deducts $1 for every $2 ...
The Federal Insurance Contributions Act (FICA) (codified in the Internal Revenue Code) imposes a Social Security withholding tax equal to 6.20% of the gross wage amount, up to but not exceeding the Social Security Wage Base ($97,500 for 2007; $102,000 for 2008; and $106,800 for 2009, 2010, and 2011). The same 6.20% tax is imposed on employers.
In 2020, the Social Security Wage Base was $137,700 and in 2021 was $142,800; the Social Security tax rate was 6.20% paid by the employee and 6.20% paid by the employer. [1][2] A person with $10,000 of gross income had $620.00 withheld as Social Security tax from his check and the employer sent an additional $620.00.
The employer is also liable for 6.2% Social Security and 1.45% Medicare taxes, [10] making the total Social Security tax 12.4% of wages and the total Medicare tax 2.9%. (Self-employed people are responsible for the entire FICA percentage of 15.3% (= 12.4% + 2.9%), since they are in a sense both the employer and the employed; see the section on ...
The result, as predicted by the U.S. Budget Committee, could be a 21% reduction in Social Security benefits as of 2033 and an 11% cut to Medicare Part A benefits in 2036.
If you once put 10% of each paycheck aside, you could now aim for 10% of each Social Security check. Even just 5% is better than nothing, especially if you invest it wisely.
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