MAXIMUM SOCIAL SECURITY CONTRIBUTION
Since being enacted by President Franklin Delano Roosevelt as a means to help struggling Americans during the Great Depression, Social Security has provided certain benefits to eligible workers across the nation — and their dependents. The maximum Social Security contribution refers to the highest amount of earnings subject to the Social Security payroll tax for a given year. For 2023, this amounts to $160,200.
What is Social Security?
As previously mentioned, Social Security is a federal program that primarily serves to provide financial protection to eligible workers and their families in case of events that alter financial health, such as retirement, disability, or death. The program is funded through FICA, a payroll contribution deducted from workers' paychecks and subsequently matched by their employers.
Social Security provides a plethora of benefits to eligible workers, including:
- Retirement benefits — Social Security provides retirement benefits to workers who have reached the eligible age and have earned enough credits through payroll taxes. These benefits are intended to help replace a portion of a worker's income in retirement.
- Disability benefits — Social Security provides disability benefits to workers who are unable to work due to a long-term illness or injury. These benefits are intended to help provide financial support to workers who are unable to earn a living.
- Survivor benefits — Social Security provides survivor benefits to the families of workers who have died. These benefits are intended to help provide financial support to the families of workers who have died.
- Medicare — Social Security also provides Medicare, a federal health insurance program for people aged 65 or older, as well as certain younger people with disabilities.
- Supplemental Security Income (SSI) — Social Security also administers the SSI program, which provides financial assistance to people with limited income and resources who are aged 65 or older, blind, or disabled.
To be eligible for Social Security benefits, a worker must have earned a certain amount of credits through paying payroll taxes over the course of their working career. The number of credits required for eligibility depends on the worker's age and the specific benefit they want to claim.
How do self-employed taxpayers contribute to Social Security?
Self-employed individuals are responsible for paying both the employee and employer portions of the Social Security payroll tax — their total contribution equals the combined employee and employer portions paid by employees.
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