When Can I Stop Paying Social Security Tax?

by Michael Keenan
All earned income under the wage base is hit with Social Security taxes.

Social Security taxes, also known as Old Age, Survivors and Disability Insurance, is part of the Federal Insurance Contributions Act. As of 2013, the rate is 6.2 percent for both the employer and the employee, or 12.4 percent if you're self-employed. Though there are circumstances under which you won't pay any Social Security tax, there's no set date that you become exempt.

No Age Limit

There's no age limit after which you can stop paying Social Security taxes. And no, even if you're receiving Social Security benefits, that doesn't mean you stop paying Social Security taxes. If you choose to continue work after you start receiving benefits, your employer will still continue to withhold Social Security taxes from your paycheck.

No Earned Income

If you don't have any earned income, you won't have to pay any Social Security taxes that year, regardless of your age. For example, if you're unemployed for the year, you won't pay Social Security taxes on your unemployment benefits. In addition, earned income does not include pension income, so if you stop working and only receive a pension or take distributions from your retirement plan, such as a 401(k) or individual retirement account, you won't pay any Social Security taxes.

Exceeding the Wage Base

On the other end of the spectrum, you won't pay Social Security taxes after your earned income for the year exceeds the Social Security wage base. This amount varies from year to year based on inflation. For example, in 2013 the wage base is $113,700. If you earn $114,700 in 2013, you won't pay Social Security taxes on the last $1,000 of that income.

Unearned Income

If you have unearned income during the year, you'll never pay Social Security taxes on that amount. Typical unearned income includes interest, dividends and capital gains income. Similarly, if you receive alimony or child support payments from an ex-spouse, you won't pay Social Security taxes on that income either.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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