The Tenure Tax: Social Security Withholdings On Academic 2010-2024

The Tenure Tax: Social Security Withholdings On Academic: What You Should Know

Note: this note is not a tax primer. It merely lists a couple of the most discussed questions. I will address the tax factors in more detail later (if they are pertinent). The Federal Income Tax Rate In 1937, a 25 percent tax on earned income was levied. The tax rate was then increased to 28 percent in 1941 after Franklin D. Roosevelt's administration passed the income tax. Since then, individual income is taxed at the same rate regardless of taxable threshold. Thus, while individuals were taxed at 25 percent on their unearned income, the full 35 percent was paid by all taxpayers. The tax rate on wage income was subsequently increased to 60 percent in 1964 after President Lyndon B. Johnson signed a bill increasing tax rates to the 64 percent level (including social security taxes) in that year. Social security taxes were originally set at 10.25 percent in 1944. The tax was revised again in 1962 to 11.65 percent. But in 1975, the tax rate was raised to 12.4 percent. A tax holiday was granted in 1976, so some taxpayers paid no tax at all. (This will be discussed in more detail later.) In 1976, Congress raised the tax rate to 13.25 percent. (This is when Social Security's payroll tax was also abolished). Social Security Pay: The Taxable Period The taxable period of Social Security taxes varies according to: a) the gross taxable income of the employee; b) the employee's spouse's gross taxable income; c) the employee's children who, for purposes of the FICA tax, are treated as the employee's dependents; or d) the child's spouse. Under the FICA tax: If the employee's net self-employment income (total income minus total expenses) is less than the taxpayer's adjusted gross income of 3,000, the employee is a qualified, qualifying widow(er) and her spouse must file a tax return. She may also pay an additional 6.2 percent surtax if the net self-employment income is more than 9,275. If the net self-employment income is between 9,275 and 32,900, the FICA tax threshold for a widow(er) is 18,000. The married employee will pay 2.9 percent on his or her gross self-employment income between 9,275 and 32,900 (6.2 percent without the surtax).

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