Updated August 26, 2026. Quick answer: no, not on covered railroad work. Both the tax code and the Social Security Act put railroad service on a list of things that are not Social Security “employment”, so no FICA is owed on it. What the employee pays instead is the Railroad Retirement Tax Act: a Tier I percentage that the statute defines as the sum of the two ordinary FICA employee rates (6.2% and 1.45%, so 7.65%), plus a separate Tier II tax set at 4.9% for 2026. Paying in is a different question from drawing out, and this page keeps them apart.
The exclusion is written into both statutes, in the same words
Section 3121(b) of the tax code defines Social Security “employment” and then says the term shall not include a numbered list. Item (9) on that list is “service performed by an individual as an employee or employee representative as defined in section 3231” — the Railroad Retirement Tax Act definition. The Social Security Act carries the same exclusion at 42 U.S.C. § 410(a)(9), pointing at the same section 3231.
“service performed by an individual as an employee or employee representative as defined in section 3231”
26 U.S.C. § 3121(b)(9)
Read them yourself: 26 U.S.C. § 3121 and 42 U.S.C. § 410. Both are exclusion lists, and railroad service sits at item (9) in each.
That is a narrow holding, and it is worth saying what it does not mean. It does not mean a railroad employee can never have a Social Security record. Non-railroad work is still ordinary employment, and the Railroad Retirement Board itself describes annuitants who also draw an actual Social Security benefit. The exclusion is about which system taxes the railroad paycheck, not about who a person is.
What comes out of a railroad paycheck instead
The interesting thing about the Tier I employee rate is that the Railroad Retirement Tax Act never prints a percentage for it. Section 3201(a) defines the “applicable percentage” as “the sum of the rates of tax in effect under subsections (a) and (b) of section 3101 for the calendar year” — that is, the two ordinary FICA employee rates, whatever they happen to be. So Tier I moves when FICA moves, automatically, without the railroad statute being amended.
- Tier I, old-age/survivors/disability component: 6.2%. The § 3101(a) rate, adopted by cross-reference.
- Tier I, hospital-insurance component: 1.45%. The § 3101(b)(1) rate, adopted the same way.
- Tier I total: 7.65%. The sum § 3201(a) requires.
- Tier II, employee, 2026: 4.9%. Section 3201(b) imposes the tax at “the percentage determined under section 3241” and leaves the number to an annual notice; the 2026 notice sets it at 4.9%. The employer side of the same notice is 13.1%.
- Arithmetic total of the cited employee components: 12.55%. 7.65% plus 4.9%. Read this as addition, not as one flat rate on every dollar — the next section explains why.
Tier II is not a fixed number in the statute at all. It is recomputed from an “average account benefits ratio” — an average of the account benefits ratios for the ten most recent fiscal years — and § 3241(d) requires the Treasury to publish the following year’s rates in the Federal Register no later than December 1. That is why the Tier II rate on this page is dated and the Tier I rates are not.
Sources for the rates: 26 U.S.C. § 3201, 26 U.S.C. § 3241, and the 2026 Tier 2 tax-rate notice.
Why the total is not one flat rate
The three components are charged on three different slices of pay, which is the part most summaries skip. For the capped part of Tier I, § 3231(e)(2)(B)(i) borrows the Social Security “contribution and benefit base” outright. The hospital-insurance part is then carved back out of that cap by a separate clause tied to the § 3101(b) rate. And Tier II gets its own base rule rather than simply reusing the Tier I one.
Honest gap: we are not printing the dollar ceilings. The statutes we read establish the rules for the bases; they do not state the current-year dollar amounts, and we will not carry a figure we have not read at its source. See 26 U.S.C. § 3231 for the base rules themselves.
Paying in and drawing out are different questions
Here is the part that makes the exclusion feel contradictory. On the tax side railroad service is outside Social Security. On the benefit side, Tier I starts by asking exactly the opposite question. Section 231b(a)(1) sets the Tier I amount at the old-age or disability benefit the worker would have been entitled to under the Social Security Act “if all of his or her service as an employee after December 31, 1936, had been included in the term ‘employment’ as defined in that Act.”
The Railroad Retirement Board puts the same idea plainly: Tier I “is based on both the railroad retirement and social security earnings acquired by an employee and computed under social security formulas,” and it “approximates what social security would pay if railroad work were covered by social security.”
When someone is actually awarded a Social Security benefit as well, the RRB says the Tier I portion is reduced by that benefit to prevent a duplication of benefits based on Social-Security-covered earnings. The RRB also says this reduction can apply where the Social Security benefit rests on someone else’s record, such as a spouse’s or a former spouse’s. Tier II is treated differently: the RRB says it is based on railroad service and earnings alone, computed under a separate formula, and is not reduced for entitlement to a Social Security benefit. See the RRB question-and-answer on dual benefit payments.
The same counterfactual runs underneath the plumbing. The financial-interchange provision at 45 U.S.C. § 231f(c)(2) settles accounts between the trust funds so as to place each fund where it would have been if post-1936 railroad service “had been included in the term ‘employment’ as defined in the Social Security Act” and in the Federal Insurance Contributions Act. The exclusion on the tax side and the “as if it had counted” rule on the benefit side are two halves of one design.
What this page will not do
It will not estimate your tax or your annuity. The tax depends on your compensation against three different bases; the annuity depends on your earnings record. Anyone quoting you a single number without both is guessing. For the structure, see Railroad Retirement explained; for the arithmetic on the benefit side, how railroad retirement is calculated; for the two-program interaction, drawing both and railroad retirement vs Social Security.
The sources this page is built from
Every figure above is quoted or computed from these, read in full for this page on August 26, 2026. Nothing here is taken from a secondary summary.
- 26 U.S.C. § 3121 — the FICA employment definition and its exclusion list.
- 42 U.S.C. § 410 — the parallel Social Security Act exclusion.
- 26 U.S.C. § 3201 — the RRTA employee taxes and the § 3101 cross-reference.
- 26 U.S.C. § 3241 — how the Tier II rate is determined and published.
- 26 U.S.C. § 3231 — the compensation-base rules for each component.
- Publication of the Tier 2 Tax Rates, 90 Fed. Reg. 53444 (November 25, 2025) — the 2026 rates.
- 45 U.S.C. § 231b — the Tier I benefit starting point.
- 45 U.S.C. § 231f — the financial interchange.
- RRB Q&A, Dual Benefit Payments — the agency’s own explanation of the Tier I reduction.
General information only, not legal, tax or benefits advice. Clear Money Guide is not affiliated with the Railroad Retirement Board, the Internal Revenue Service or the Social Security Administration, and this page carries no offer.