Social Security taxes may not be simple to understand at first. However, keeping things simple will allow everyone to get it quickly. One of the first things you need to know is the fact that you have to pay taxes to Social Security as you work. The amount of money you pay on taxes will depend on your income. Part of your salary goes to finance Social Security benefits.
Not only will you pay taxes on your work to Social Security, but your employer will also pay them. Thus, you will have to pay 6.2 percent of your payroll and your employer another 6.2%. In the event of being self-employed, you will have to be able to pay for it all. That is a total of 12.4 percent of your payroll. The second interesting and important thing you need to know is the taxable maximum.
What is the taxable maximum Social Security sets every year?
Social Security establishes a new limit every year. They limit the amount of earnings subject to taxes during a year. For instance, if you earn as much as 160,200 dollars or more, that is the taxable maximum in 2023. If you earn more money than that, you would still contribute as much as $9,932.40. Remember that the money you pay now pays today’s benefits for other people.
Many workers believe Social Security keeps the money they pay in taxes for their retirement, but it is not like that. The next thing you may need to know is how to work out the taxes you may have to pay. Making use of the IRS SSA-1099 form will be the easiest way. You can see how much you got and then calculate how much you need to pay on taxes to SSA.
Is your Social Security benefit taxable?
It will depend on the other sources of income you may have. According to Social Security, if your combined income is between $25,000 and $34,000 and you are filing as a single person, you will have to pay up to 50% of your retirement benefits. You will have to pay up to 85% if your earnings exceed $34,000. Filing a joint return has different thresholds.
Despite the fact that the percentage will be up to 50% on your benefits too, the amount for couples will be between $32,000 and $44,000. Earning more than 44,000 dollars will imply paying up to 85% of your retirement benefits.