Payroll

What Is FICA Tax?

FICA stands for the “Federal Insurance Contributions Act,” and it’s a federal tax that employers and employees pay. FICA tax includes two taxes: Medicare tax and Social Security tax. The 2018 tax rates for employers are 6.2% for Social Security and 1.45% for Medicare.

  • Medicare tax, which supports the Medicare program, a federal health insurance offering for Americans who are 65 or older; and
  • Social Security tax, which pays for federal retirement and disability benefits that support millions of Americans each year.

FICA is paid by both employer and employees, split evenly. If you’re self-employed, then you’re responsible for paying all  Social Security and Medicare taxes through the self-employment tax (SECA).

What are the 2018 FICA tax rates?

Below are the FICA tax rates for employers and employees. These tax rates do not change from year to year but maximum amount you are required to pay can change each year.

Employers and employees each pay:

  • 6.2% Social Security tax on the first $128,400 of the employee earned in 2018. That means the max each party can pay in Social Security tax for the year is $7,960.80; and
  • 1.45% Medicare tax

Some employees may also have to pay an Additional Medicare Tax. This 0.9% tax applies to those who make more than the threshold amount each calendar year. That threshold is

  • $125,000 for those who are Married Filing Separate
  • $200,000 for those who file their taxes as Single or Head of Household
  • $250,000 for those who are Married Filing Jointly

Withholding and filing requirements can be tricky for employer and employee taxes, so it’s best to work with a CPA or payroll provider to help ensure that your payroll taxes are handled correctly.

Here’s a table that recaps who and how much.

2018 FICA Tax Rates

FICA tax Employer Rates Employee Rates
Social Security Tax 6.2% 6.2%
Medicare Tax 1.45% 1.45%
Additional Medicare Tax* NA 0.9%

*See full description above to see which employees have to pay the Additional Medicare Tax.

 

This article provides general information and shouldn’t be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.