Who Is Exempt From Social Security and Medicare Withholding?
Understand the criteria and specific situations that exempt individuals from Social Security and Medicare payroll tax withholdings.
Social Security and Medicare taxes, known as FICA taxes, are mandatory payroll deductions funding two federal programs. Social Security provides benefits for retirees, individuals with disabilities, and children of deceased workers. Medicare offers hospital insurance for the elderly and certain disabled individuals. While most U.S. workers pay these taxes, specific employment relationships, international statuses, or religious convictions allow for exemptions.
Exemptions for Specific Employment Relationships
Certain employment relationships are exempt from Social Security and Medicare tax withholding. Students working for the educational institution where they are enrolled and regularly attending classes may qualify. This applies when the student’s primary relationship with the institution is educational, and their employment is incidental to their studies. The exemption applies to half-time undergraduate or graduate students who are not full-time or professional employees.
Household employees, such as babysitters or house cleaners, are subject to a de minimis threshold for FICA taxes. For 2025, if cash wages paid to a household employee reach $2,800 or more, both the employer and employee are responsible for Social Security and Medicare taxes. If total cash wages fall below this annual threshold, the wages are not subject to FICA.
Children employed by their parents in a sole proprietorship or a partnership where both parents are partners can also be exempt from FICA taxes. Wages paid to a child under the age of 18 in such a business are not subject to Social Security and Medicare taxes. Income tax withholding still applies regardless of the child’s age.
Student nurses and medical interns providing services in hospitals or training schools may also be exempt from FICA taxes. This exemption applies when the services are performed as part of their training and are incidental to their academic pursuit.
Exemptions for International and Diplomatic Personnel
Exemptions from FICA taxes extend to certain international and diplomatic personnel based on their status and employment. Nonresident aliens, who are not U.S. citizens or green card holders and do not meet the substantial presence test, may be exempt from FICA on specific income. This applies to those on non-immigrant visas, such as F-1, J-1, M-1, or Q-1/Q-2, when their services relate to their visa purpose and they are classified as nonresidents for tax purposes. For F-1, J-1, M-1, and Q-1 students, this exemption covers the first five calendar years of their U.S. presence. J-1 scholars, teachers, researchers, and physicians are exempt for their first two calendar years.
Employees of foreign governments, including diplomatic and consular officers and their families, are exempt from FICA tax on compensation for services performed in their official capacities. This exemption is based on international agreements and the principle of reciprocity, where the foreign government grants similar exemptions to U.S. government employees in their country.
Individuals employed by international organizations also qualify for FICA exemption under the International Organizations Immunities Act. This act grants privileges and exemptions to designated public international organizations and their employees. Compensation for official services performed for such organizations is not subject to Social Security and Medicare taxes, regardless of the employee’s citizenship or residence. U.S. citizens working for international organizations may still be subject to self-employment tax on their earnings if services are performed in the United States.
Exemptions for Religious or Conscience Objections
Certain religious or conscientious objections can provide exemptions from Social Security and Medicare tax obligations. Members of religious faiths conscientiously opposed to accepting benefits from any public or private insurance, including Social Security and Medicare, may qualify. To be eligible, the religious group must have been in continuous existence since December 31, 1950, and provide for its dependent members. Individuals seeking this exemption must formally apply to the IRS by filing Form 4029. Approval of this form means the individual waives all rights to Social Security and Medicare benefits.
Ministers, members of religious orders who have not taken a vow of poverty, and Christian Science practitioners have unique FICA exemption rules. They may elect out of Social Security and Medicare coverage for their ministerial earnings if conscientiously or religiously opposed to accepting public insurance benefits. This election is made by filing Form 4361 with the IRS. The exemption, once approved, applies only to earnings from ministerial services and is irrevocable. Ministers are considered self-employed for Social Security and Medicare purposes, even if they receive a salary.
Employer and Employee Responsibilities Regarding Exemptions
Once an employee’s exemption status from Social Security and Medicare withholding is determined, both the employee and employer have specific responsibilities. An employee claiming an exemption must inform their employer and provide necessary documentation or certification. For instance, a nonresident alien might provide a Form W-8BEN, while a member of a religious group with an approved exemption would share a copy of their IRS-approved Form 4029. For student employees, communicating their qualifying enrollment status is sufficient.
The employer’s role involves verifying the validity of the claimed exemption based on the documentation or information provided by the employee. After confirming the exemption, the employer ceases to withhold FICA taxes from the employee’s wages. This verification process ensures compliance with federal tax regulations.
The non-withholding of FICA taxes is reflected in the employer’s payroll records and year-end tax reporting. For employees exempt from FICA, their wages on Form W-2 will not have amounts reported in boxes 3 (Social Security wages), 4 (Social Security tax withheld), 5 (Medicare wages), and 6 (Medicare tax withheld). This ensures the employee’s earnings are correctly accounted for without FICA contributions.