When Do You Stop Paying Social Security Taxes?

You can determine for yourself, using CEPR’s calculator, when individuals with different wage incomes cease making Social Security payments.

The majority of us pay payroll and income taxes on our entire income every year. However, millionaires have already stopped paying their annual Social Security taxes after just two months of 2023.

Thirteen million children of deceased wage earners receive retirement, disability, and survivor benefits from Social Security, which benefits one in six Americans. Social Security is financed by a 6. 2 percent payroll tax that employees pay, plus an extra 6 2 percent paid by employers. The tax only covers the first $160,200 in earnings in 2023. That means that on February 28, 2023, a person making $83,333 per month—and $1,000,000 annually—will cease to make Social Security contributions.

Most workers make less than $160,200 annually, so they are responsible for paying the 6 In 2023, they will pay a 2 percent social security payroll tax on every paycheck they receive. However, workers’ earnings over $160,200 are exempt from taxation. Merely 1% or less of a millionaire’s total income is allocated towards funding Social Security. Even though a millionaire earns significantly more than the average worker, their effective tax rate is substantially lower than that of the worker. As a result, working-class and middle-class people bear the brunt of the cost of maintaining Social Security.

It is anticipated that in the upcoming years, the Social Security Trust Fund will not have enough money to continue paying full benefits. This is largely due to increasing income inequality. When the payroll tax cap was put in place in 1983, only 10% of earnings were above it and were not subject to taxes. However, the amount of earnings over the cap increased to 18 in 2021. 6 percent. The program’s supporting tax has become less applicable to more earnings due to the ongoing upward redistribution of income.

The projected shortfall would be closed and expansions that would increase Social Security’s adequacy and inclusivity would be possible if the payroll tax cap were completely eliminated and everyone was subject to the same tax rate, in addition to other modest adjustments.

While it’s true that everyone working in covered employment or self-employment must pay Social Security taxes regardless of age or eligibility for benefits, there are some exceptions to this rule. This article will explore the various scenarios in which you may stop paying Social Security taxes, including reaching a certain income threshold, belonging to specific religious groups, or being a nonresident alien with a particular visa status.

Reaching the Income Threshold

The most common exception to paying Social Security taxes is reaching the income threshold. For 2023, this threshold is $160,200. Once your income surpasses this amount, you will no longer be subject to Social Security taxes on the portion of your earnings exceeding the threshold. However, it’s important to note that Medicare taxes still apply to all income, regardless of the amount.

Religious Exemptions

Members of certain religious groups who officially decline to accept Social Security benefits may be exempt from paying Social Security taxes. However, this exemption comes with several restrictions, including the requirement that the group must have been in existence since 1950 and have provided its members with a realistic standard of living since that time.

Nonresident Aliens

Nonresident aliens employed in the U.S. typically pay Social Security taxes on their income earned here. However, exceptions exist for foreign government employees, students, and educators living and working in the country temporarily with the correct visa type. In some cases, their families and domestic workers may also be exempt.

American College Students

American college students working part-time at their schools may be exempt from Social Security taxes if their employment is contingent on their full-time enrollment status or half-time status in their last semester, trimester, or quarter.

Pre-1984 Federal Employees

Federal government employees hired before 1984 are covered under the Civil Service Retirement System (CSRS) and do not pay Social Security taxes. However, those hired in 1984 or later are part of the Federal Employees Retirement System (FERS) and contribute to Social Security at the current tax rate.

State and Local Government Workers

State or local government employees, including those working for public schools, colleges, or universities, may or may not pay Social Security taxes. If they’re covered by both a pension plan and Social Security, they must contribute to Social Security. However, if they’re covered solely by a pension plan, they are exempt from Social Security contributions.

While most working individuals must pay Social Security taxes regardless of age, several exceptions exist. These exceptions include reaching the income threshold, belonging to specific religious groups, being a nonresident alien with a particular visa status, being an American college student working part-time at your school, being a pre-1984 federal employee, or being a state or local government worker covered solely by a pension plan.

Frequently Asked Questions

Q: At what age do I stop paying Social Security taxes?

A: You never stop paying Social Security taxes as long as you are working and earning income below the annual threshold. However, once your income exceeds the threshold, you will no longer be subject to Social Security taxes on the portion of your earnings exceeding the threshold.

Q: Do I have to pay Social Security taxes if I am retired?

A: Yes, you must still pay Social Security taxes if you are retired and continue to work and earn income below the annual threshold.

Q: Can I get a refund of Social Security taxes I have already paid?

A: In general, you cannot opt out of paying Social Security taxes. However, if you overpay due to having multiple jobs or other factors, you may receive a refund when you file your federal income tax return.

Q: Are there any other exceptions to paying Social Security taxes?

A: Yes, there are a few other exceptions, such as being a member of a religious group that has officially declined to accept Social Security benefits or being a nonresident alien with a particular visa status.

Q: Where can I find more information about Social Security taxes?

A: You can find more information about Social Security taxes on the Social Security Administration website (www.ssa.gov).

The projected shortfall would be closed and expansions that would increase Social Security’s adequacy and inclusivity would be possible if the payroll tax cap were completely eliminated and everyone was subject to the same tax rate, in addition to other modest adjustments.

Most workers make less than $160,200 annually, so they are responsible for paying the 6 In 2023, they will pay a 2 percent social security payroll tax on every paycheck they receive. However, workers’ earnings over $160,200 are exempt from taxation. Merely 1% or less of a millionaire’s total income is allocated towards funding Social Security. Even though a millionaire earns significantly more than the average worker, their effective tax rate is substantially lower than that of the worker. As a result, working-class and middle-class people bear the brunt of the cost of maintaining Social Security.

The Social Security Trust Fund is projected to fall short of the amount needed to continue paying full benefits in coming years. This is largely due to increasing income inequality. When the payroll tax cap was implemented in 1983 only 10 percent of earnings exceeded it and went untaxed. But by 2021, the amount of earnings above the cap had grown to 18.6 percent. Continued upward income redistribution has shifted more earnings out of range of the program’s supporting tax.

You can determine for yourself, using CEPR’s calculator, when individuals with different wage incomes cease making Social Security payments.

Thirteen million children of deceased wage earners receive retirement, disability, and survivor benefits from Social Security, which benefits one in six Americans. Social Security is financed by a 6. 2 percent payroll tax that employees pay, plus an extra 6 2 percent paid by employers. The tax only covers the first $160,200 in earnings in 2023. That means that on February 28, 2023, a person making $83,333 per month—and $1,000,000 annually—will cease to make Social Security contributions.

Everyone working in covered employment or self-employment regardless of age or eligibility for benefits must pay Social Security taxes. However, there are narrow exceptions to paying Social Security taxes that apply at any age, such as an individual who qualifies for a religious exemption. When you’re ready to apply for retirement benefits, use our online retirement application, the quickest, easiest, and most convenient way to apply.

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