Social Security Rate Definition
The social security rate definition is a tax taken out of employees and employers salaries and wages. This tax goes towards the social security program in the United States. The founders built this program to provide benefits to eligible retired persons.
Social Security Tax Rate Meaning
The current social security tax rate withheld from each paycheck is in the amount of 6.2%, and is equally contributed for by the employer making the total 12.4%. For example, the social security tax cap 2010 is equal to $106,800. This means that once an employee has made earnings of this amount there can be no further tax taken out for that employee’s paychecks. Furthermore, these calculations are normally not performed by the employee. Instead, the payroll department or an outsourced function calculates the social security rate.
Social Security Tax Rate Example
For example, Bob works for Testacorp Inc. his annual salary is $200,000 which he receives in a paycheck every two weeks for $8,333. Therefore, Social Security requires Bob to pay a social security tax. The amount for his first 13 paychecks equals $516. After these paychecks, Bob’s cumulative earnings are above the threshold of $106,800.
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