How to Calculate Social Security Deductions on Earned Income
The Social Security tax only applies to earned income, such as your employment wages or self-employment income. If your earned income comes from self-employment earnings, you have to pay the employer portion and the employee portion. As an employee, your employer withholds the required amount from your paycheck for Social Security, but if you are self-employed, you have to figure the tax for yourself. The rates can change yearly and the amount the tax applies to adjusts with inflation. As of 2011, it only applies to $106,800 of your earned income.
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Instructions
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Look up the Social Security tax rates on the Social Security Administration website (see References). If you are an employee, you only need to know the employee rate. If you are self-employed, you need to know both the employee and employer rates. As of 2011, the employee rate equals 4.2 percent and the employee rate equals 6.2 percent.
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Add the employee rate to the employer rate if self-employed. If your earned income comes as an employee, only use the employee rate.
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Divide the appropriate rate by 100 to convert to a decimal. For example, in 2011, if you are an employee, divide 4.2 percent by 100 to get 0.042. If you are self-employed, divide 10.2 percent by 100 to get 0.102.
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Multiply the appropriate rate by your pay, up to the annual limit per year. If you have not reached the annual limit, your entire paycheck is taxed. For example, if you receive a $2,675 monthly paycheck as an employee, multiply $2,675 by 0.042 to find $112.35 will be deducted for Social Security taxes.
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