Social Security Tax

You know how your paycheck is smaller than you thought it’d be? And how you get a fun tax refund sometimes? That’s because your employer withholds some money from your paycheck for you. Well, for the government. For you to pay the government.

Your employer pays the same percentage as you. Right now, that's 12.4%. If you’re a freelancer, you’re paying this twice: once as an employer and as a worker. If that sounds like a lot of money (everyone paying over 12% of their income to Social Security tax)...it is. That’s because Social Security is a big monster-of-a-program. It pays money to retirees starting at age 62, the disabled who can’t work, and survivors (orphans and spouses of working folk).

The Social Security tax is a regressive tax, since a larger proportion of lower-income workers’ total income is going into the system than higher income earners. The Social Security tax only goes up to $132,900, so if you make more than that, that extra money won’t be taxed for Social Security.

If you’ve got a ways to go before age 62, you should be wondering if you’ll get all that money you’re paying out back when you retire. Or really any of it. Since such a large group is retiring right now...all those Baby Boomers...Social Security is running out of money. There’s just not enough money going in to cover all those post-war babies. The population isn’t growing today like it was when the Social Security program was created. The idea was that you pay it forward, but that idea is based on the working class being a certain magnitude larger than the retiring class. Oof.

Can you get out of paying Social Security taxes? Yep. But only if you’re part of a religious group that doesn’t want to get the benefits later. Or if you’re a student studying abroad in the U.S. from another country, or a nonresident alien that’s working for a foreign government in the U.S. (like at an embassy). Oh, and if you’re a student working at a school you go to in a work-study-type program.

Time to start a television church, eh?