Federal Income Tax | Social Security Tax | Medicare Tax
Federal Income Tax
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What is Social Security Tax?
The next largest tax is Social Security Tax. This tax is 6.2% of an employees' income paid by the employer, and 6.2% paid by the employee. Self-employed people are responsible for both halves of the Social Security Tax.
This tax is paid only on the employee's first $90,000 of income, but that threshold increases every year, and has been increasing faster than inflation. Social Security taxes are taken from earned income (wages), but not from other sources of income, such as interest or dividends.
The amount of earned income subject to the tax is limited at the upper end, and effectively limited on low income earners by being ameliorated by an earned income tax credit, essentially a negative tax.
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