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What are "Social Security Wages"? What Wages are Exempt from FICA Tax?


Question: What are "Social Security Wages"? What Wages are Exempt from FICA Tax?

Employers must deduct FICA tax (Social Security/Medicare) from all wages/salaries paid to employees. But some types of payments are exempt from FICA tax:


Payments to Employees That are Exempt from FICA Tax:
This is a list of some of the most common types of payments to employees that are exempt from being included in wages subject to FICA tax. For a complete list, see IRS Publication 15, Chapter 15

  • Some disabled worker wages paid after the year the worker was entitled to disability insurance
  • Employee business travel expenses reimbursed for amounts not exceeding the specified government rate for per diiemsor standard mileage
  • Family employees under age 18 (age 21 for domestic work)
  • Fringe benefits are taxable "on excess of fair market value of the benefit over the sum of an amount paid for it by the employee and any amount excludable by law."
  • Employee insurance
  • Payments to partners of a partnership
  • Employer contributions to qualified retirement plans
  • Payments to statutory non-employees (such as qualified real estate agents and direct sellers)
  • Tips under $20 a month
  • Workers compensation payments
Some other payments to workers in specialized industries are exempt. Read IRS Publication 15, chapter 15 for more details.

Back to FICA Taxes Explained


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