Social Security Tax Deduction
Although most taxes that you pay during the year are itemized deductions on your Federal taxes, social security taxes are not deductible. A social security tax deduction is allowed for the self-employed, however.
All employees must pay social security taxes. These are normally deducted from your pay and appear as a deduction on your pay check stub. Many employees are not aware that they are actually paying only half of the tax. The employer is paying the other half. The normal FICA, as it is called, tax deduction that you see on your pay check is 7.65% of your gross income. The employer is paying an additional 7.65%. There is no social security tax deduction allowed when you itemize deductions.
This is sometimes confusing to tax payers who are itemizing their deductions without help from a tax expert. Many taxes that you pay during the year such as sales taxes and personal property tax are allowable itemized deductions. Your social security tax is currently not allowed as a tax deduction.
A self employed person is allowed to make a social security tax deduction due to the fact that they are actually paying the full amount of the tax. Since they are their own employer they must also pay the employers share. The deduction is designed to bring the amount paid more into parity with non-self employed tax payers.
The self-employed tax payers are allowed to deduct 7.65% from their gross earnings before they compute the FICA tax at 15.3%. Then, they are allowed to claim a further 50% of the tax, after the adjustment above is taken, as a business expense on their Federal tax. This makes their social security tax obligation as close as possible to employed workers.
There are often questions asked about such additional social security matters such as Supplemental Social Security payments and Social Security Disability payments. These questions are best referred to a tax professional or to the Social Security office in your area. The important point to remember is that you are not allowed to deduct your social security tax as an itemized deduction. The issue has been a political question in the past and this has led to some confusion. However, the IRS is very clear on this point. Neither your federal tax nor your social security tax is an allowable deduction when itemizing on your return.