The Social Security tax rate is 12.4 percent of earnings, 6.2 percent paid by the employee and 6.2 percent paid by the employer. In 2014 the wage cap for earnings taxed was 117,000, and the 2015 cap is $118,500, explains Business Management Daily.Continue Reading
Social Security taxes are comprised of the old age, survivors and disability insurance taxes, as stated by the IRS. A Medicare tax, also known as hospital insurance tax, is assessed at 2.9 percent, half paid by the employee and half paid by the employer. These two taxes are often referred to together as Social Security tax. There is no earnings cap applied to the Medicare tax, and an additional Medicare tax is assessed at 0.9 percent on earnings over $200,000 as of 2015.
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 introduced an employee-side Social Security tax reduction of 2 percent for 2011 and 2012. During those two years, employers were taxed 4.2 percent instead of 6.2 percent of their employees' wages, notes the IRS.
The old age and survivors tax was first collected in 1937 when the maximum contribution per year was $30. Disability insurance tax was added in 1957 and Medicare in 1966. The 2010 maximum contribution for Social Security tax, not including Medicare, was $6,621.60, according to the Social Security Administration.Learn more about Income Tax