What are Social Security Wages (W-2)?

Social Security wages refer to the earnings of an employee that are subject to federal Social Security tax. Employers must deduct this tax even if the employee doesn’t expect to qualify for Social Security benefits. Social Security wages have a maximum taxable income limit that includes qualified employee wages and/or self-employment income. The maximum limit changes every year to adjust for inflation, improve the system’s finances, and provide reasonable benefits for higher wage earners.

How Does This Affect Employees Working in Another Country?

For employees who work in another country, Totalization Agreements coordinate Social Security taxation and coverage with some countries to eliminate dual taxation and coverage.

How are Social Security Wages Different Than Gross Income?

Gross income is not the same as Social Security wages as Social Security wages are based on the gross income, which has specific inclusions and exclusions. Tips that count as Social Security wages include those that exceed $20 per month. To calculate an employee’s Social Security wages, take the employee’s gross pay amount and subtract any exclusions such as reimbursed travel expenses and HSA contributions.