Q: What Is the 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 2019 tax rates for employers are 6.2% for Social Security and 1.45% for Medicare.

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Tell me more. What is the Medicare tax?

This tax supports the Medicare program, which provides federal health insurance for Americans who are 65 and older. Both employers and employees must pay the Medicare tax. (Self-employed people pay both the employer and employee portions of the Medicare tax as part of the self-employment tax.)

What are the Medicare tax withholding rates?

The 2019 rate for the Medicare tax is set at 1.45% of an employee’s gross earnings, and the employer portion matches that 1.45%. The employee’s portion is deducted from their wages while the employer pays their share directly.

Some employees may also have to pay an Additional Medicare Tax. This 0.9% tax applies to individuals who make more than a set threshold amount each calendar year. The 2019  thresholds are:

  • $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

Got it. So what is the Social Security tax?

The Social Security tax pays for federal retirement and disability benefits that support millions of Americans each year. Just like Medicare, both employers and employees must pay the Social Security tax. And, just like Medicare, self-employed folks pay both shares—employer and employee—as part of the self-employment tax.

What are the Social Security tax withholding rates?

The 2019 rate for the Social Security tax is 6.2% of an employee’s gross earnings up to $132,900, with a matching 6.2% from the employer. The employee’s portion is deducted from their wages while the employer pays its share directly.

How about a table that summarizes FICA tax rates?

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

2019 FICA Tax Rates

FICA taxEmployer RatesEmployee Rates
Social Security Tax6.2%6.2%
Medicare Tax1.45%1.45%
Additional Medicare Tax*NA0.9%

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

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

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