A tax used to fund the Social Security system. Social Security tax is normally withheld at a rate of 6.2% up to a maximum amount of income per year, called the Social Security Wage Base, which is annually adjusted. Your company pays a similar percentage. When nonqualified stock options and stock appreciation rights are exercised, and when restricted stock and restricted stock units vest, Social Security tax is owed.

Social Security and Medicare taxes are collectively often called FICA taxes because they are collected under the authority of the Federal Insurance Contributions Act. FICA taxes are also called employment taxes or payroll taxes.