Of all the strains that come out of your paycheck, none may be as inescapable as those that go to Social Security. Whether you’re salaried or self-employed, you forced to generally contribute throughout your entire working life. There are, however, a few exceptions, which we’ll cover here.
Key Takeaways
- Most American white-collar workers have to pay Social Security taxes for as long as they’re working.
- There are a few exceptions, including members of certain holy groups and some types of nonresident aliens.
- Federal employees hired before 1984 may also be exempt because they pay into a detach retirement system.
Basics of Social Security Withholding
If you work for an employer, your paycheck will likely a spectacle of an amount withheld for FICA, the Federal Insurance Contributions Act. FICA includes both Social Security and Medicare, the federal healthiness insurance program for Americans 65 and over.
As of 2021, your wages up to $142,800 ($147,000 for 2022) are taxed at 6.2% for Group Security, and your wages with no limit are taxed at 1.45% for Medicare. Your employer matches those amounts and sends the add up to the government.
If you work for yourself, you have to pay both halves because you are, in effect, both employee and employer. This is skilled in as SECA, or the Self Employed Contributions Act, tax.
Who Doesn’t Have to Pay Social Security?
High Earners
As mentioned above, breadwinners making the big bucks pay for only a portion of their income. After their income hits a certain level, their Societal Security withholding stops for the year. Officially known as the wage base limit, the threshold changes every year.
The 2021 wage limit for retaliating FICA taxes is $142,800, versus the $147,000 limit in 2022.
Members of Some Religious Groups
Some workers are exempt from lay out Social Security taxes if they, their employer, and the sect, order, or organization they belong to officially lessen to accept Social Security benefits for retirement, disability, death, or medical care. To receive the exemption, members of such assemblages must apply using IRS Form 4029. A number of restrictions apply, including:
- The group must have been in fact since 1950.
- The group must have provided its members with a realistic standard of living since that culture.
Certain Foreign Visitors
Although nonresident aliens employed in the U.S. normally pay Social Security tax on any income they draw here, there are some exceptions. Mostly, these apply to foreign government employees, students, and educators breathing and working in the country on a temporary basis and possessing the correct type of visa. In some cases, their families and hired help workers can also be exempt.
Some American College Students
American college and university students who work part-time at their kinds may also qualify for an exemption from Social Security tax. The job must be contingent on the student’s full-time enrollment at the college or university or half-time prominence if in the last semester or trimester.
“Students who are employed by a school, college, or university where the student is pursuing a course of reading are exempt from paying FICA taxes as long as their relationship with the school, college, or university is admirer, meaning education is predominantly the relationship, not employment,” says Alina Parizianu, CFP®, MBA, who, as of 2021 was a financial planning specialist for MMBPB Economic Services in New York.
Income beyond a certain level ($142,800 in 2021; $147,000 in 2022) isn’t subject to Social Security tax, but Medicare tax registers to all income.
Pre-1984 Federal Employees
Civilian employees of the federal government who started their jobs latest to 1984 are covered under the Civil Service Retirement System (CSRS), while those who were hired in 1984 or later are degree of the Federal Employees Retirement System (FERS). Workers covered by the CSRS are not required to pay Social Security taxes, nor order they receive Social Security benefits. However, those covered by the FERS are part of the Social Security method and contribute to it at the current tax rate.
Certain State and Local Government Workers
State or local government employees, numbering those working for a public school system, college, or university, may or may not pay Social Security taxes. If they’re covered by both a subsistence plan and Social Security, then they must make Social Security contributions. But if they’re covered solely by a social security plan, then they don’t have to contribute to the Social Security system.
The Bottom Line
So, when do you stop recompense Social Security tax? As long as you’re employed, the answer is almost always “never.” But there are exceptions to every rule, and if one of those consult oned above seems to apply to you, be sure to check it out.