[Teresa Ghilharducci | Forbes.com] Most likely you will pay your Social Security taxes all year round. But some high earners will stop paying before their hangover headache hits in the wee hours of New Year’s Day.
Social Security benefits are paid by the FICA tax, which is 12.4% of pay (split evenly between the employer and the employee). But earnings are taxed only up to a cap. In 2020, the cap was $137,700. The cap is set at $142,800 in 2021.
About 94.6% percent of American workers pay FICA tax all year long because our annual earnings fall below the cap and about 5.4% of workers earned more than the Social Security cap — see that in my favorite table of wage statistics provided by the Social Security Administration. These people are taxed by the Social Security system as if they earned under $137,700.
Nine million earners out of 169 million workers earned wages and salaries over the Social Security taxable cap, and 4027 people earned over $10 million in 2019 – $2,397 every hour; they will have fully paid their Social Security tax by the time they start work Monday, January 4, the first working day of 2021.
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