You may not need to pay Social Security tax on all of your earnings if you have a high salary. Workers pay into the Social Security system until their income reaches the Social Security tax limit for that year. In 2021, the Social Security taxable maximum is $142,800. Earnings above this amount are not subject to Social Security tax or factored into Social Security payments in retirement.
Most workers pay 6.2% of their earnings into the Social Security system each year, and employers match this amount. Self-employed workers contribute 12.4% of their paychecks to Social Security. However, high earners only pay into the Social Security system until their pay reaches the Social Security taxable maximum, which is $142,800 in 2021.
Earnings over $142,800 are not taxed by Social Security or used to calculate future Social Security payments. “Once you reach the maximum taxable earnings, currently $142,800 for calendar year 2021, withholdings from your employer will discontinue, resulting in a higher paycheck,” says Mike Biggica, a certified financial planner and founder of Pixel Financial Planning in San Francisco. “Your employer payroll department tracks this maximum and will discontinue withholding for Social Security.”