Wages for Social Security Purposes (2024)

FAQs

Wages for Social Security Purposes? ›

“Wages” means all payment for services you perform for your employer. Wages do not have to take the form of cash. The cash value of all compensation paid to you in any form other than cash is also considered wages (unless the form of payment is specifically not covered under the Social Security Act).

When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you're self-employed. We include bonuses, commissions, and vacation pay.

Only earned income, your wages, or net income from self-employment is covered by Social Security. If money was withheld from your wages for “Social Security” or “FICA,” your wages are covered by Social Security.

Box 1 (Wages, Tips and Other Compensation) represents the amount of compensation taxable for federal income tax purposes while box 3 (Social Security Wages) represents the portion taxable for social security purposes and box 5 (Medicare Wages) represents the portion taxable for Medicare tax purposes.

Social Security benefits are typically computed using "average indexed monthly earnings." This average summarizes up to 35 years of a worker's indexed earnings.

Substantial earnings are defined as $31,275 or more for 2024 (up from $29,700 for 2023). This exemption generally applies to retirees who started a second career after their first retirement. It may also benefit those who have changed jobs midway through their career. You were eligible for pension payments before 1986.

Earned income does not include amounts such as pensions and annuities, welfare benefits, unemployment compensation, worker's compensation benefits, or social security benefits.

Social Security benefit taxes are based on what the Social Security Administration (SSA) refers to as your “combined” income. That consists of your adjusted gross income, plus any nontaxable interest you earned (and certain other items) and half of your Social Security income.

Are 401k Withdrawals Considered Income for Social Security Purposes? They're not income on which you'd have to pay Social Security taxes. Social Security only considers earned income, such as a salary or wages from a job or self-employment.

How do I calculate my Social Security wages on my W-2? ›

Box 3 "Social security wages": Social security wages are calculated as Federal Taxable Gross (Box 1) plus Retirement Deductions (Box 12).

Social Security taxes are the 6.2% taken out of your paycheck each month (up to $168,600, the 2024 taxable maximum) while FICA refers to the combination of Social Security and Medicare taxes.

A: No, However, paying your medical insurance premiums in pre-tax dollars instead of after-tax dollars will reduce the total amount of your taxable income, and so less money will be withheld in Social Security and income taxes. This will increase the amount of your take-home pay.

Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $168,600 (in 2024), while the self-employed pay 12.4 percent.

Social Security tax FAQs

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net earnings if you're self-employed. We include bonuses, commissions, and vacation pay.

Earnings refers to money earned from employment, whereas income is total money received, including from earnings, benefits and pensions, and so on. You would have to determine whether your 'miscellaneous income' is earned or not.

What earnings are covered under Social Security? Covered earnings are work-related earnings which are subject to Social Security taxation. Covered earnings include most types of wage income and self-employment income.

who did not withhold Social Security taxes, any pension or annuity you receive from that employer is based on what we call "non-covered earnings." This means that those earnings are not "covered" under the Social Security Act.

Earned Income. Earned income includes all of the following types of income: Wages, salaries, tips, and other taxable employee pay. Employee pay is earned income only if it is taxable.