States Without Social Security Tax in 2024

Ed Bradley

2 min read

·

31-12-2024

18

0

Share

There's a common misconception that states can levy their own Social Security taxes. This is incorrect. The Social Security tax, as mandated by the Federal Insurance Contributions Act (FICA), is a federal tax, collected uniformly across all 50 states. There are no states in 2024, or any year for that matter, that do not collect the Social Security portion of FICA from employees and employers.

Understanding FICA and Social Security Taxes

The Federal Insurance Contributions Act (FICA) is the federal law that mandates the collection of Social Security and Medicare taxes. These taxes fund vital social safety net programs.

• Social Security Tax: This portion of FICA funds retirement, disability, and survivor benefits. In 2024, the employee's portion of the Social Security tax is 6.2% of earnings up to a taxable maximum (this maximum changes annually). Employers also contribute a matching 6.2%.

• Medicare Tax: This portion of FICA funds the Medicare health insurance program for the elderly and disabled. The employee's share of the Medicare tax is 1.45% of all earnings, with employers contributing an equal amount. Higher-income earners pay an additional 0.9% Medicare tax.

State Taxes and Their Relation to Social Security

While states cannot impose their own Social Security taxes, they do collect their own income taxes, which are distinct from federal taxes like FICA. These state income taxes vary widely in rates and structures across different states. Some states have no income tax at all. However, this is completely separate from the federal Social Security tax. Confusing these two is a frequent misunderstanding.

Dispelling the Myth

The idea that certain states don't collect Social Security taxes likely stems from the varying state income tax structures and the complexity of tax laws. However, it is crucial to understand that the Social Security tax is a federal mandate and applies consistently nationwide. There is no legal basis for any state to exempt itself from this federal tax obligation.

Conclusion

In summary, no state in the US is exempt from collecting the Social Security portion of FICA taxes. All employers and employees across the 50 states are subject to the federal Social Security and Medicare tax rates. Understanding this distinction between federal and state tax systems is essential for accurate financial planning and compliance.