Video transcript:
Ever wonder what the Social Security tax is? In this edition of Tax Tips by TurboTax, we'll explore it's for, how you pay it, and how much you owe.
You may have noticed a line on your pay stub for Social Security, FICA, or OASDI. These all relate to the Social Security tax, which is separate from your federal income tax.
The government collects this money to fund the benefits you will eventually receive when you retire, and to assist people who are unable to work. So, how much Social Security tax do you need to pay?
Whether you're an employee or self-employed, you must pay 12.4% of the first $176,100 to Social Security. However, if you're an employee, only 6.2% comes directly out of your paycheck.
Your employer covers the other 6.2%. But if you're self-employed, you generally must pay the entire 12.4% yourself. The good news? You can deduct half of it on your federal income tax return.
For example, if you had $100,000 of self-employment earnings subject to Social Security tax, you'll owe 12.4% of that amount, which is $12,400 for Social Security taxes.
However, half of that amount, which is $6,200, can be subtracted from the taxable income reported on your Form 1040. That will reduce your federal income tax bill.
When you file your taxes with TurboTax, you don't need to worry about manually entering your Social Security tax details. Just snap a photo of your W-2 and we will autofill your information.
Visit https://turbotax.intuit.com/ for more info to help you file your taxes with confidence.
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