Are unemployment benefits subject to Social Security tax?

Unemployment benefits are not subject to Social Security tax because they are considered to be a form of public assistance rather than earned income. Social Security taxes are typically levied on wages and self-employment income that individuals earn from employment activities. Since unemployment benefits are payments made to individuals who are temporarily out of work and not receiving wages, these benefits do not fall under the categories of income that are taxable for Social Security purposes.

This distinction is crucial as it reflects the fundamental design of the Social Security program, which aims to provide financial support during periods of unemployment without further taxing that support. Therefore, individuals receiving unemployment benefits will not see these payments subjected to the Social Security tax, allowing them to retain the full amount of the benefits they receive while seeking new employment.