How is the Social Security tax calculated?

The calculation of the Social Security tax is determined as a percentage rate applied to an employee's earnings, but it is subject to a wage cap. This means there is a specific maximum amount of earnings that is taxable for Social Security purposes. For 2023, this wage cap is set at $160,200, which means that any earnings above this amount are not subject to the Social Security tax.

The Social Security tax rate is currently set at 6.2% for employees. Therefore, an employee's tax liability for Social Security is calculated by taking 6.2% of their earnings, but only up to the designated cap. This structure balances the need for funding the Social Security program while ensuring that high earners do not contribute excessively beyond a certain point.

Other options presented do not accurately reflect how the Social Security tax is assessed, as they either do not impose a cap or consider factors that are unrelated to the tax calculation.