What type of earnings are exempt from Social Security taxes?

Investment income is indeed exempt from Social Security taxes. This is a key point because Social Security taxes are primarily levied on earned income, which generally consists of wages and salaries from employment. Unlike earned income, investment income—such as interest, dividends, and capital gains—does not fall under the categories subject to Social Security tax.

Pension income, wage and salary income from covered employment, and unemployment compensation all represent forms of income that are either subject to taxation or designed as benefits related to work. Wage and salary income is the most common form of earnings that contribute to Social Security, as these are directly connected to employment. Unemployment compensation is also subject to certain federal taxes but is not exempt from taxation in the same way that investment income is.

Overall, recognizing the nature of different income types and their relationship with Social Security taxation helps clarify why investment income stands out as the correct answer in this context.