Social Security taxes are the part of US payroll taxes that finances the federal Old-Age, Survivors and Disability Insurance (OASDI) program, commonly known as Social Security. They are levied under the Federal Insurance Contributions Act (FICA) on wages paid to employees, and under the Self-Employment Contributions Act on the net earnings of self-employed people. Together with the Medicare tax, they make up what is usually called FICA tax.
For employers, Social Security taxes matter in two ways. The employer must withhold the employee's share from each paycheck and pay it to the government, and it must also pay a matching employer share out of its own funds. Both amounts are recorded in the accounts as liabilities until paid, and the employer's share is a business expense.
Rates and the wage base
- Employee share: 6.2 percent of wages, withheld from pay.
- Employer share: a further 6.2 percent of the same wages.
- Self-employed individuals: 12.4 percent of net self-employment earnings, covering both shares, with half of the self-employment tax deductible for income tax purposes.
- Wage base: the tax applies only up to an annual limit on each employee's earnings, which is adjusted every year in line with average wage growth. For 2026 the limit is $184,500. Wages above the limit are free of Social Security tax but still subject to Medicare tax, which has no cap.
Because of the cap, Social Security tax is regressive at high incomes: someone earning twice the wage base pays the same dollar amount as someone earning exactly the base. An employee who works for two employers in one year may have too much withheld in total; the excess is refunded through the individual's income tax return, but each employer still owes its own full matching share.
Worked example and journal entries
A company's monthly payroll for its staff is $90,000 of gross wages, all below the wage base. Social Security tax withheld from employees is $90,000 times 6.2 percent, or $5,580. Medicare tax withheld at 1.45 percent is $1,305, and federal income tax withheld is $11,000. Net pay is $72,115.
The payroll entry debits salaries and wages expense $90,000 and credits Social Security taxes payable $5,580, Medicare taxes payable $1,305, federal income tax withheld $11,000 and cash $72,115. A second entry records the employer's taxes: debit payroll tax expense and credit Social Security taxes payable $5,580 and Medicare taxes payable $1,305, along with any federal and state unemployment taxes. The total Social Security liability is therefore $11,160. These balances appear in current liabilities as payroll taxes payable until deposited.
If one executive earns $250,000 for the year, Social Security tax applies only to the first $184,500. Once cumulative pay passes that figure, the company stops withholding the 6.2 percent and stops paying its match for that person for the rest of the year. The employee's total is $184,500 times 6.2 percent, or $11,439, and the employer pays the same.
Deposits and reporting
Employers deposit withheld income tax and both shares of FICA electronically with the Treasury on a monthly or semiweekly schedule, depending on the size of their past liabilities, and report them quarterly on Form 941 to the Internal Revenue Service. Annual wages and Social Security wages for each employee are reported on Form W-2, which also feeds the employee's earnings record at the Social Security Administration. Failing to deposit withheld taxes is treated seriously: responsible individuals can be held personally liable for the unpaid amounts through the trust fund recovery penalty, because the money withheld belongs to the government. For broader context on employer obligations, see the entries on payroll taxes, employer payroll taxes and withholding tax, and on federal unemployment tax, which is paid by employers only.