Whether you work for an employer or are self-employed, you're required to give the government a share of your earnings. In the U.S., employers withhold taxes from each paycheck for Social Security and Medicare. Those taxes are collectively referred to as FICA taxes.
What is FICA tax?
FICA is a payroll tax, and it's short for the Federal Insurance Contributions Act. The law requires employers to withhold a certain percentage of an employee’s wages to help fund Social Security and Medicare. The total bill is split between the employer and the employee.
FICA tax rate 2023-2024
FICA taxes are a combination of Social Security and Medicare taxes that equal 15.3% of your earnings. If you work for an employer, you are responsible for half of the total bill (7.65%), which includes a 6.2% Social Security tax and 1.45% Medicare tax on your earnings.
On your paycheck, the Social Security portion of FICA is sometimes labeled as “OASDI tax,” which is short for “old-age, survivors, and disability insurance” tax. Your Social Security number is used to record how much you've paid.
If you're self-employed, you are responsible for paying the full 15.3% FICA tax. Because you may not be receiving a traditional paycheck, you may need to file estimated quarterly taxes in lieu of withholdings. The good news? You can usually deduct half of what you pay in self-employment taxes when you file your tax return.
In 2023, only the first $160,200 of your earnings are subject to the Social Security tax. In 2024, the first $168,600 is subject to the tax. For both years, there is an additional 0.9% surtax on top of the standard 1.45% Medicare tax for those who earn over $200,000 (single filers) or $250,000 (joint filers).
Your employer is also responsible for paying half of the total FICA obligation.
Employee pays
Employer pays
Social Security tax (aka OASDI)
6.2%(only the first $160,200 in 2023 and the first $168,600 in 2024).
6.2%(only the first $160,200 in 2023 and the first $168,600 in 2024).
Medicare tax
1.45%.
1.45%.
Total
7.65%.
7.65%.
Additional Medicare tax
0.9%
(on earnings over $200,000 for single filers; $250,000 for joint filers).
What is withholding tax?
A withholding tax is an income tax that a payer (typically an employer) remits on a payee's behalf (typically an employee). The payer withholds the tax from the payee's income. FICA tax is a type of withholding tax.
Other payroll tax items you may hear about
FUTA tax: This stands for Federal Unemployment Tax Act. The tax funds a federal program that provides unemployment benefits to people who lose their jobs. Employees do not pay this tax or have it withheld from their pay. Employers pay it.
SUTA tax: The same general idea as FUTA, but the money funds a state program. Employers pay the tax.
Why do I have to pay FICA tax?
Employers have to withhold taxes — including FICA taxes — from employee paychecks because taxes are a pay-as-you-go arrangement in the United States. When you earn money, the IRS wants its cut as soon as possible.
Some people are “exempt workers,” which means they elect not to have federal income tax withheld from their paychecks. Social Security and Medicare taxes will still come out of their checks, though.
Typically, you become exempt from withholding only if two things are true:
You got a refund of all your federal income tax withheld last year because you had no tax liability.
You expect the same thing to happen this year.
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The FICA tax rate, which is the combined Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent, remains 7.65 percent for 2023 (or 8.55 percent for taxable wages paid in excess of the applicable threshold).
Employers and employees split the tax. For both of them, the current Social Security and Medicare tax rates are 6.2% and 1.45%, respectively. So each party – employee and employer – pays 7.65% of their income, for a total FICA contribution of 15.3%.
In 2023 and 2024, there are seven federal income tax rates and brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Taxable income and filing status determine which federal tax rates apply to you and how much in taxes you'll owe that year.
First, we calculate your adjusted gross income (AGI) by taking your total household income and reducing it by certain items such as contributions to your 401(k).
Next, from AGI we subtract exemptions and deductions (either itemized or standard) to get your taxable income.
The Social Security tax rate for employees and employers is 6.2% of employee compensation each for a total of 12.4%. The Social Security tax rate for those who are self-employed is 12.4%. Self-employed people must pay both halves. There's a limit, or tax cap, on the amount of earned income that's subject to taxation.
The OASDI maximum taxable amount—$160,200 in 2023—is updated automatically each year in relation to increases in the national average annual wage. The current FICA tax rate applicable to both employees and employers is 6.2 percent for OASDI (5.015 percent for OASI and 1.185 percent for DI ) and 1.45 percent for HI .
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
Your new year paycheck might have different withholding amounts for federal taxes. Effective Jan 1 2024, IRS has updated the federal tax brackets.The rates remain at 0%, 10%, 12%, 22%, 24%, 32%, 35%, or 37% but the ranges have been adjusted for inflation.
In 2023, the maximum taxable wage base for SDI was $153,164 and the SDI tax rate was 0.9 percent. For 2024, the SDI withholding rate increases to 1.1 percent with no taxable wage limit and maximum withholding for each employee subject to SDI contributions.
Are Social Security Benefits (Income) Taxable? If your combined income is above a certain limit (the IRS calls this limit the base amount), you will need to pay at least some tax. The limit for 2023 and 2024 is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child.
The FUTA rate for 2023 is 6.0% of the first $7,000 in wages for all employees, or approximately $420 per employee (assuming every employee makes at least $7,000 per year).
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