What's the Use of Social Security Tax?
There's no simple explanation as to where your social security tax is going. Now before we actually talk about it, you have to first understand what social security tax is.
It is a type of tax collected through and under a certain law, such as FICA in the U.S. It covers the collectible percentage from your earned income that usually includes wages, tips, and self-employment earnings. In the U.S., the taxes on social security benefits are also called as old age, survivors, and disability insurance. The thing with this payroll tax is that in most instances, it will be running a surplus. So if you're asking where the surplus is supposed to go, the only entity that can answer that is the government.
For residents in the U.S., social security has the right to directly tax the pay of wage earners, both those employed and self-employed with social security benefits taxable. Based on the recent requirement of the Federal Insurance Contribution Act or FICA, employees will have to pay 6.2 percent on their gross income and the employer will have to match that percentage, too. Meanwhile, there's a separate tax, exactly 1.45 percent to be paid and matched by the employer, this time intended for the expenses under Medicare. For an employed individual, the total payable tax will be 7.65 percent. If you are self-employed, you are therefore required to cover 15.3 percent. Don't worry though because half of the tax you will pay is then deductible from the federal income taxes.
How Is It Supposed to Benefit You?
The direct and immediate purpose of paying the taxes covered by FICA is for payment of government obligations under Social Security and Medicare. Through paying your social security taxes, you earn work credits, which will be used to let you qualify for availing retirement benefits. As of 2010, every taxpayer will have the right to earn four credits per year. In order to become fully eligible for benefits, you will have to earn at least forty credits. Find out more about social security tax here at http://www.ehow.com/about_4693846_social-security-tax.html.
So now you exactly know the answer to the question: is social security taxable? The fact is it is. You may be one of those who are quite disappointed to realize there's a huge chunk of the money you earn that will go to paying taxes, especially if you look at what people are paying in other countries. But the thing is you need to realize that the U.S. has a great history and reputation of providing its citizens their rightful due as a way of giving back to them what they paid in taxes at socialsecuritytaxstrategy.com, and that is in the form of comprehensive retirement and health care benefits. In the end, there's really not much you can do about the requirement of paying the social security tax, but just consider it as your investment for your future retirement.
