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The
total
Social Security Tax rate is 12.4%. Them employee pays
6.2% and the employer also pay 6.2%
on wages of up to $117,000.
Social Security taxes
are paid based on a wage base (taxable income). In 2011 the
wage base was $106,800. For 2012 the wage base was raised
to $110,100.
The 4.2% reduction for employees only applies
to the first $38,350 taxable income.
Self Employed:
If you are self
employed you are required to pay both the employee and
employer Social Security taxes. Your effective rate
before the employee reduction is 12.4%. With the
employee reduction the self-employed rate is 10.4%.
The IRS allows
self-employers to deduct half of their self-employment tax
when calculating their adjusted gross income.
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