General Social Security Tax Rules

Most people who earn wages in the United States are required to contribute to the Social Security and Medicare programs through payroll contributions. Contributions are required regardless of a worker’s residency status. A total contribution of 15.3% of gross wages is required for each worker, half of which is contributed by the employer. Therefore, the amount the employee pays is 7.65% (6.2% for Social Security and 1.45% for Medicare). The maximum taxable wage for Social Security is $128,400 in 2018 (this amount is adjusted each year). The Medicare tax continues on all wages, and is increased for higher income earners.

The prize for these contributions is retirement and disability benefits, but only if enough credits are earned to become eligible. A maximum of four credits can be earned each calendar year, based on earnings. In the year 2018, a worker must receive $1,320 in covered earnings to get one Social Security or Medicare credit, and $5,280 to get the maximum of four credits for the year. It takes 40 credits to be eligible for retirement benefits. The number of credits required for disability payments depends on a worker’s age and when they become disabled.

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