What are the main sources of funding for Social Security?
Executive summary
Social Security’s primary financing comes from payroll (FICA/OASDI) taxes paid by workers and employers, supplemented by interest on trust fund assets and income from taxation of benefits; Supplemental Security Income (SSI) and some administrative costs rely on general revenues and congressional appropriations [1] [2] [3]. Long-term projections from the Trustees show payroll taxes plus interest have so far funded benefits but face a growing gap as trust fund reserves are drawn down over the coming decades [4] [5].
1. Payroll taxes: the backbone of Social Security funding
The largest single source of Social Security income is payroll taxes collected under OASDI—6.2 percent from employees and 6.2 percent from employers on earnings up to the annual taxable maximum, with Medicare’s HI tax (1.45 percent) collected separately on all earnings [1]. Changes to the taxable maximum directly affect revenues—Congress indexed that cap upward to $184,500 for 2026, bringing more wages into the Social Security tax base and raising immediate receipts [1] [6]. Coverage rules and the capped base mean the system’s revenue growth is tied to wages and the politically set taxable maximum [1] [6].
2. Trust funds and interest earnings: rules and reality
Payroll-tax receipts and the taxation of benefits are credited to the Social Security trust funds (OASI and DI), which in turn invest surpluses in special-issue Treasury securities that earn interest; that interest is an important, sometimes large component of program income when reserves are positive [2] [5]. The Trustees report tracks assets and projects when reserves will be exhausted; while past surpluses helped build over $2 trillion in assets, projections show reserve depletion dates for trust funds decades out and growing annual deficits thereafter—meaning interest income will shrink as assets are redeemed [5] [4].
3. Taxation of benefits and other credited receipts
Since the 1983 reforms, a portion of Social Security benefits is subject to income tax for higher-income beneficiaries, and those receipts are credited back to the trust funds, boosting program income beyond payroll taxes [5] [2]. The SSA’s budget materials note transfers and estimated tax income credited to trust funds as part of the annual receipts picture, with specific dollar projections provided in budget documents [2].
4. General revenues, appropriations, and SSI distinctions
Not all payments come from payroll-tax-funded trust funds: Supplemental Security Income (SSI) is a needs-based program funded from general revenues of the Treasury rather than the OASDI trust funds, and administrative expenses (LAE) are subject to congressional appropriations and specific user-fee offsets in the SSA budget request [3] [7] [8]. The SSA’s FY2026 budget materials itemize LAE requests, SSI payments, and one-time appropriations and note transfers and advances made by Congress to smooth cash flow [8] [2].
5. The funding picture going forward and policy choices
Trustees’ projections show the combined OASI and DI annual balance moving from small surpluses in the near term to increasing deficits later this century, with continuing payroll taxes alone projected to cover a declining share of scheduled benefits once reserves fall—illustrating that funding adequacy depends on legislative action or demographic and economic shifts [4] [5]. Policymakers therefore face discrete levers—raising payroll tax rates, lifting or eliminating the taxable maximum, using general revenues, reducing benefits, or changing indexing rules—each with political and distributional consequences not fully addressed in the SSA budget documents provided [4] [5].
6. What the reporting does and does not settle
SSA budget and Trustee materials clearly document revenue sources—payroll taxes, interest on trust assets, taxation of benefits, and general-revenue-funded SSI—plus administrative funding via appropriations [1] [2] [3] [7]. These sources are factual; however, the provided documents do not resolve normative questions about which policy mix is best for long-term solvency or how specific reforms would affect different cohorts, and they do not present alternative policy proposals in detail beyond budgetary projections [4] [5].