Most workers in the United States pay Social Security taxes, but federal law exempts a handful of specific groups: certain state and local government employees covered by a public pension, federal workers hired before 1984, members of qualifying religious sects, foreign students and scholars on certain visas, children working for a parent’s business, and workers temporarily assigned abroad under a Totalization Agreement. If you qualify for one of these exemptions, you skip the 6.2% payroll tax (or the 12.4% self-employment tax), but in most cases you also stop building credits toward future Social Security benefits.
Below is who qualifies, on what terms, and what the exemption costs you down the road.
State and Local Government Employees With a Qualifying Pension
State and local government workers hired on or after July 2, 1991, must pay Social Security taxes unless they belong to a qualifying public retirement system.1Social Security Administration. Mandatory Social Security and Medicare Coverage If your government employer maintains a pension plan that meets federal standards, that plan can take the place of Social Security coverage for your public earnings.
Some states have also entered into voluntary Section 218 Agreements with the Social Security Administration, which bring specific groups of public employees into Social Security through a referendum process.2Social Security Administration. Section 218 Agreements The result is a patchwork: some public employees pay into Social Security and their state pension, some pay into only one, and the rules vary by state and by position. If you work for a state or local government, check with your human resources office whether your position is covered by a qualifying retirement system, a Section 218 Agreement, or both.
Federal Employees Hired Before 1984
Federal workers hired before January 1, 1984, were enrolled in the Civil Service Retirement System (CSRS) and did not pay Social Security taxes on their federal earnings. Those earnings do not appear on their Social Security record.3Social Security Administration. Social Security Benefits for Federal Workers
Federal employees hired on or after that date fall under the Federal Employees Retirement System (FERS), which includes Social Security coverage. FERS employees pay the standard 6.2% Social Security tax and earn credits toward benefits like private-sector workers.
Members of Qualifying Religious Sects
Members of recognized religious sects that conscientiously oppose public insurance, such as the Amish and Mennonites, can apply for an exemption from Social Security and Medicare taxes. To qualify, your religious group must have a long-standing practice of caring for its dependent members continuously since December 31, 1950, and you must waive all rights to future Social Security and Medicare benefits.4Social Security Administration. Are Members of Religious Groups Exempt from Paying Social Security Taxes?
You apply by filing IRS Form 4029 with the Social Security Administration. Both the SSA and the IRS must approve the application: the SSA verifies that your sect meets the eligibility requirements, and the IRS makes the final determination. The waiver is permanent. Once approved, you cannot receive Social Security payments even if you accumulate credits from other work.
Foreign Students, Teachers, and Researchers on Certain Visas
Foreign students temporarily in the U.S. on F-1, J-1, or M-1 visas are generally exempt from Social Security and Medicare taxes for their first five calendar years, as long as their work is authorized and connected to the purpose of their visa.5Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes Foreign teachers, researchers, and other professionals on J-1 or Q-1 visas are generally exempt for their first two calendar years.6Internal Revenue Service. Alien Liability for Social Security and Medicare Taxes of Foreign Teachers, Foreign Researchers and Other Foreign Professionals
The exemption ends if you change to an immigration status that is not exempt or if you become a resident alien for tax purposes. Spouses and children in J-2 status are not covered by the exemption.
Children Working for a Parent
Wages paid to your child under age 18 are not subject to Social Security or Medicare taxes if the business is your sole proprietorship, or a partnership in which both partners are the child’s parents.7Internal Revenue Service. Family Employees – Section: Children Employed by Parents The exemption does not apply if the business is a corporation, or a partnership where anyone other than the parents is a partner.
For domestic work performed in a parent’s private home, the age threshold is higher. Social Security and Medicare taxes do not apply until the child turns 21.8Internal Revenue Service. Tax Treatment for Family Members Working in the Family Business
Workers Covered by a Totalization Agreement
U.S. citizens and residents temporarily working abroad can sometimes be exempt from the host country’s Social Security system, or from the U.S. system, through international treaties known as Totalization Agreements. These agreements prevent you from paying Social Security taxes to both the U.S. and a foreign country on the same earnings.9Social Security Administration. U.S. International Social Security Agreements
The general rule is that you pay into the system of the country where you work. But if your U.S. employer temporarily sends you to a country that has a Totalization Agreement with the U.S. and your assignment is expected to last five years or less, you typically stay in the U.S. system and skip the foreign country’s taxes. To prove your exemption, you need a certificate of coverage from the country whose system will continue to cover you.
The Earnings Above the Annual Cap
Everyone else who works in covered employment pays Social Security tax, but only up to a point. In 2026, the taxable earnings cap is $184,500.10Social Security Administration. Contribution and Benefit Base Any wages above that amount in a single calendar year are not subject to the 6.2% Social Security tax. A worker earning at or above the cap pays a maximum of $11,439 in Social Security tax for the year, and the employer pays the same amount.
The Social Security Administration adjusts the cap each year based on the national average wage index, so it generally rises over time. This ceiling applies only to Social Security taxes. Medicare taxes, including the 0.9% Additional Medicare Tax on high earners, continue to apply to all earned income with no upper limit.11Internal Revenue Service. Topic No. 560, Additional Medicare Tax
What an Exemption Costs You in Benefits
Skipping Social Security taxes means you are not earning credits toward future benefits on those earnings. To qualify for retirement benefits, you need at least 40 Social Security credits, roughly 10 years of covered work. In 2026, you earn one credit for every $1,890 in covered earnings, up to four credits per year.12Social Security Administration. Social Security Credits and Benefit Eligibility
If you spent part of your career in exempt employment, such as a CSRS federal job or a non-covered state pension position, and part in Social Security-covered work, your benefit used to be reduced by the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO). The WEP reduced your own retirement benefit, and the GPO reduced spousal or survivor benefits, when you also received a pension from work not covered by Social Security.
The Social Security Fairness Act, signed into law on January 5, 2025, ended both the WEP and the GPO for benefits payable after December 2023.13Social Security Administration. Social Security Fairness Act: Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) If your benefit was previously reduced under either provision, those reductions no longer apply.
Religious sect members who filed Form 4029 are in a different position. They waived all benefits, so they cannot receive any Social Security payments regardless of other credits they may have earned.
If You Skip Taxes You Actually Owe
Claiming an exemption you don’t qualify for, or simply failing to pay, brings penalties. An employer that doesn’t deposit withheld payroll taxes on time faces escalating charges based on how late the deposit is:14Internal Revenue Service. Failure to Deposit Penalty
- 1 to 5 days late: 2% of the unpaid deposit
- 6 to 15 days late: 5% of the unpaid deposit
- More than 15 days late: 10% of the unpaid deposit
- More than 10 days after a first IRS notice: 15% of the unpaid deposit
Owners and officers face a further risk. Anyone responsible for collecting and paying over withheld payroll taxes who willfully fails to do so can be held personally liable for the full amount of the unpaid tax under the Trust Fund Recovery Penalty. It can be assessed against owners, officers, or anyone else with authority over the company’s finances.15Office of the Law Revision Counsel. 26 U.S. Code 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax
Self-employed workers who don’t make required quarterly estimated payments can face underpayment penalties. To avoid them, your payments and withholding for 2026 should cover at least 90% of your current-year tax liability, or 100% of last year’s (110% if your adjusted gross income exceeded $150,000).16Internal Revenue Service. Form 1040-ES – Estimated Tax for Individuals