what is social security taxes used for?
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They include: unemployment insurance benefits and supplements, accident, injury and sickness benefits, old-age, disability and survivors' pensions, family allowances, reimbursements for medical and hospital expenses or provision of hospital or medical services.
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Besides income taxes, there are other federal taxes withheld from your paycheck: taxes that finance Social Security and Medicare, also known as payroll taxes or FICA (short for Federal Insurance Contributions Act). You split these with your employer. ... The Medicare tax is 1.45 percent of income, with no limit.
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How is Social Security financed? Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $137,700 (in 2020), while the self-employed pay 12.4 percent.
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Social Security is funded primarily through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA). ... With few exceptions, all legal residents working in the United States now have an individual Social Security number.
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Income Taxes And Your Social Security Benefit Some of you have to pay federal income taxes on your Social Security benefits. ... between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. more than $34,000, up to 85 percent of your benefits may be taxable.
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This publication, Understanding the Benefits, explains the basics of the Social Security retirement, disability, and survivors insurance programs. The current Social Security system works like this: when you work, you pay taxes into Social Security. We use the tax money to pay benefits to: ... People who are disabled.
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Payroll taxes include federal, state, and local income taxes, federal and state unemployment taxes, and Medicare and Social Security taxes. They are automatically taken out of your paycheck every time you are paid, based on a flat, fixed tax rate for state and local income taxes and Medicare and Social Security taxes.
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Social Security Withholding The Social Security tax is a tax on earned income, and it is separate from federal income taxes. ... This tax is separate from the income tax, so the amounts withheld from your paychecks for Social Security taxes won't reduce your income taxes.
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You report your earnings for Social Security when you file your federal income tax return. ... If you're self-employed, you pay the combined employee and employer amount, which is a 12.4 percent Social Security tax on up to $137,700 of your net earnings and a 2.9 percent Medicare tax on your entire net earnings.
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What Is the Social Security Tax Limit? You aren't required to pay the Social Security tax on any income beyond the Social Security Wage Base. In 2020, this limit is $137,700. As a result, you'll pay no more than $8,537.40 ($137,700 x 6.2%) in Social Security taxes.
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The payroll taxes taken from your paycheck include Social Security and Medicare taxes, also called FICA (Federal Insurance Contributions Act) taxes. The Social Security tax provides retirement and disability benefits for employees and their dependents. ... Employers pay part of these payroll taxes.
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The Social Security tax rate is higher, but there's an upper income limit above which Social Security taxes are not levied. The Medicare tax rate is lower, but it applies to all wages. Together, Medicare and Social Security payroll taxes are known as FICA taxes (Federal Insurance Contributions Act taxes).
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Up to 50% of Social Security benefits are taxed on income from $25,000 to $34,000 for individuals or $32,000 to $44,000 for married couples filing jointly. Up to 85% of benefits are taxable if the income level is over $34,000 for individuals or $44,000 for couples.
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Social Security and Medicare are two other taxes withheld from every tax-paying worker. Social Security is calculated as 6.2% of your gross earnings.
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Besides income taxes, there are other federal taxes withheld from your paycheck: taxes that finance Social Security and Medicare, also known as payroll taxes or FICA (short for Federal Insurance Contributions Act).
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Some of you have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return).
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The Social Security tax only applies to your earned income, such as wages, bonuses and self-employment income. All of your unearned income, like capital gains, interest and dividends, are exempt from the Social Security tax, regardless of how much income you have.