Social Security And Taxes: What You Pay And What You Get

Most workers know a little something about Social Security taxes, even if they don’t quite understand how the whole system works. But how much do you pay in? How much can you get back? And why, after paying Social Security taxes for years, can you wind up paying federal income tax on your benefits?

Here’s what you need to know.

Paying Into Social Security

Social Security has been around for more than 90 years. President Franklin D. Roosevelt signed the Social Security Act into law in 1935, and workers began paying the tax in 1937. At the time, the tax rate was 1% for employees and 1% for employers on the first $3,000 of wages.

Regular monthly retirement benefits began in 1940. The first monthly Social Security retirement check, $22.54, was issued to Ida May Fuller of Ludlow, Vermont, on January 31, 1940. Fuller, a retired legal secretary, paid just $24.75 in Social Security taxes between 1937 and 1939. She lived to 100 and ultimately collected $22,888.92 in benefits.

Today, if you’re an employee, Social Security taxes are part of the Federal Insurance Contributions Act, or FICA, taxes that are withheld from your paycheck. For 2026, the Social Security tax rate is 6.2% for employees, and your employer kicks in another 6.2%, bringing the total tax to 12.4%. Those rates haven’t changed since 1990 (there was a temporary payroll holiday in 2011 and 2012 in response to the 2008 economic crisis).

What has changed is the cap. For 2026, the Social Security tax applies only to the first $184,500 of wages. So if you earn $184,500 in wages, you’ll pay the same amount as Jeff Bezos or Warren Buffett would on $184,500—or $1 million—of wages. If you earn more than $184,500, the excess isn’t subject to Social Security tax and won’t count toward your future Social Security benefit.

You’ll typically see Medicare tax withheld alongside Social Security tax. The Medicare tax rate is 1.45% for employees and 1.45% for employers. Unlike Social Security, however, Medicare tax doesn’t have a wage cap—you pay that rate on all earnings. Higher earners may also be subject to the 0.9% Additional Medicare Tax.

What If You’re Self-Employed?

When you work for yourself, there’s no employer to pay half of the Social Security and Medicare tax. That’s where self-employment tax comes in.

Generally, if you have $400 or more in net earnings from self-employment, you’re subject to self-employment tax. The amount subject to self-employment tax is generally 92.35% of your net self-employment earnings, which is the amount of your gross income from your trade or business less your ordinary and necessary trade or business expenses.

Since you pay both portions (the employer and employee rates), the tax rate is 12.4%. Ditto for Medicare, for a combined self-employment tax rate of 15.3%. Fortunately, the Social Security wage limit still applies.

Self-employed taxpayers also generally receive an above-the-line deduction for the employer-equivalent portion of self-employment tax. That deduction reduces income for federal income tax purposes, but it doesn’t reduce the amount of self-employment tax. (Remember, tax deductions reduce taxable income dollar for dollar, whereas tax credits reduce the tax owed dollar for dollar.)

Getting Social Security Benefits

As you work and pay Social Security taxes, you earn credits toward eligibility for benefits. In 2026, you earn one credit for every $1,890 in covered earnings, up to four credits per year.

Most workers need 40 credits to qualify for retirement benefits. Since you can earn no more than four credits per year, that typically means about 10 years of covered work.

That’s one reason off-the-books earnings can hurt workers twice: in addition to the tax and legal consequences, earnings that aren’t reported to Social Security generally won’t be reflected in the worker’s earnings record when benefits are calculated.

How Much Will You Get?

Social Security generally calculates retirement benefits using your 35 highest indexed earnings years. If you worked fewer than 35 years, years with no earnings count as zero in the calculation.

Those earnings are used to calculate your average indexed monthly earnings (AIME). Social Security then applies a formula to determine the benefit you’re entitled to receive at your full retirement age. Full retirement age varies by birth year (currently, it’s 67 for anyone born in 1960 or later).

Only earnings subject to Social Security tax count, which means that investment and other non-wage income won’t increase your benefit.

Your earnings record isn’t the only factor that determines your monthly check. When you claim benefits also matters. You can generally begin claiming retirement benefits at age 62, but claiming before your full retirement age reduces your monthly benefit. If you wait beyond full retirement age, delayed retirement credits can increase your benefit until age 70.

For context, for a worker who earned at least the taxable maximum each year beginning at age 22, the maximum monthly retirement benefit when starting benefits in 2026 is $2,969 at age 62, $4,152 at full retirement age, and $5,181 at age 70. These are the maximum benefits—your actual benefit depends on your earnings history and the age you begin to collect.

If you continue working after you begin receiving benefits, Social Security continues to review your earnings record. If a new year of earnings replaces one of the lower years used in your benefit calculation, your benefit can increase.

(Keep in mind that working while receiving benefits can have other consequences, too: if you haven’t yet reached full retirement age and earn more than certain limits, SSA may temporarily withhold some of your benefits.)

What About SSDI And SSI?

Social Security doesn’t just pay retirement benefits. Social Security Disability Insurance (SSDI) pays benefits to eligible workers who meet Social Security’s definition of disability. Like retirement benefits, SSDI is tied to work history. Workers generally need enough Social Security credits to qualify, though the required number depends on the worker’s age at the time the disability begins.

Supplemental Security Income (SSI) is different. SSI is a needs-based program for people who are aged, blind, or disabled and have limited income and resources. You don’t qualify for SSI by accumulating Social Security credits or paying a specific amount of Social Security tax. For 2026, the maximum federal SSI payment is $994 per month for an individual and $1,491 for an eligible couple. Actual payments can be lower depending on income and living arrangements, and some states add supplemental benefits.

Paying Tax On Social Security Retirement Benefits

Here’s the part that annoys many taxpayers. You can pay Social Security taxes throughout your working life and, after you retire, still owe federal income tax on some of your Social Security retirement benefits.

That’s because we’re talking about two different taxes. Social Security payroll taxes help finance Social Security and establish your covered earnings record. The tax that may apply to your benefits later is federal income tax, which is a separate system even if it comes out of the same check.

That wasn’t always the case. Social Security benefits were historically not generally subject to federal income tax. That changed in 1983. Under the 1983 law, up to 50% of Social Security benefits became taxable, and in 1993, the maximum portion of benefits that can be included in taxable income changed again, this time from 50% to 85%.

Start With Combined Income

To determine whether benefits are taxable, you start with what Social Security calls “combined income.” Combined income is adjusted gross income plus tax-exempt interest plus one-half of your Social Security benefits.

You then compare that number to the applicable thresholds. For single taxpayers, heads of household, and certain other individual filers, benefits generally aren’t taxable if combined income is $25,000 or less. If combined income is between $25,000 and $34,000, up to 50% of benefits may be taxable. Above $34,000, up to 85% may be taxable.

For married couples filing jointly, the corresponding thresholds are $32,000 and $44,000. Special—and generally less favorable—rules apply to married taxpayers who file separately and lived with their spouse during the year.

Unlike the standard deduction, the income thresholds for taxing Social Security benefits aren’t indexed for inflation. The $25,000 threshold for single taxpayers and the $32,000 threshold for married couples filing jointly have been frozen since 1983, while the higher thresholds of $34,000 and $44,000 have been unchanged since 1993.

If the original 1983 thresholds had kept pace with inflation (using CPI-U), a single taxpayer wouldn’t begin hitting that first Social Security tax threshold until combined income reached roughly $84,000 in 2026, rather than $25,000. For married couples filing jointly, the equivalent would be about $107,000, rather than $32,000.

Are You Paying an 85% Tax? No.

If up to 85% of your Social Security benefits are taxable, that does not mean you’re paying an 85% tax rate on them. It simply means that up to 85% of your benefits may be included in your taxable income. That income is then taxed at the federal income tax rates that otherwise apply to you.

For example, if you received $30,000 in Social Security benefits, the rule doesn’t mean you owe $25,500 in taxes. It means that, depending on your other income and the applicable formula, as much as $25,500 of the $30,000 could be included in your taxable income.

If Social Security is your only income, your Social Security retirement benefits are generally not taxable, and you may not be required to file a federal income tax return at all. But income from pensions, retirement account distributions, wages, investments, and other sources can change the calculation.

Tax-exempt interest also affects the formula. While municipal bond interest may be excluded from federal taxable income, it’s still taken into account when determining whether Social Security benefits are taxable.

What About The New Senior Deduction?

There’s been confusion about the tax on Social Security following the 2025 tax law, with the result being touted as “no tax on Social Security.” That’s not the case.

The new law created an additional deduction of up to $6,000 for qualifying taxpayers age 65 and older ($12,000 if both spouses on a joint return qualify), subject to income-based phaseouts.

The new senior deduction is age-based only, so it’s available to qualifying older taxpayers. The deduction did not eliminate the federal income tax on Social Security benefits. The existing rules still apply.

The deduction can, however, reduce taxable income for eligible taxpayers, which can reduce—or, depending on your circumstances, eliminate—your federal income tax bill.

What Should You Do Now?

If you’re still working, I suggest logging in to your SSA account to review your earnings record—you’ll want to make sure SSA has correctly recorded the wages and self-employment income used to calculate your future benefits. You can also see estimates of what your retirement benefit might look like at different claiming ages. You can create an account at SSA.gov—you’ll use the same ID.me information you use for your IRS online account.

As you get closer to retirement, talk with your financial advisor about when it makes sense to claim Social Security. Remember that waiting can increase your monthly benefit, but the best choice depends on your finances, health, other retirement income, and plans for working.

Once you’re receiving benefits, don’t forget about taxes. Your tax professional can help determine whether any of your benefits will be taxable. If you do owe tax, you may need to have federal income tax withheld from your benefits or make estimated tax payments during the year.