Note: The 7.65% tax rate is the combined rate for Social Security and Medicare. FICA tax rates are statutorily set, and therefore require new tax legislation to be changed.įor employees, the Medicare payroll tax rate is 1.45 percent on all earnings, bringing the combined Social Security and Medicare payroll tax for employees to 7.65 percent-with only the Social Security portion limited to the $118,500 earned-income threshold.Įmployers also pay a matching 1.45 percent of wages to Medicaid, while those who are self-employed must pay both the employer and employee portions of FICA taxes. Social Security and Medicare payroll taxes are collected together as the Federal Insurance Contributions Act (FICA) tax. For 2016, that’s one task less for overburdened HR staff and payroll administrators. employers must adjust their payroll systems to account for the higher taxable wage base under the Social Security payroll tax, and notify highly compensated employees affected by the change that more of their paychecks will be subject to the tax. This taxable wage base usually goes up each year-it rose from $117,000 in 2014 to $118,500 in 2015.

Social Security is financed by a 12.4 percent tax on wages up to the annual threshold, with half (6.2 percent) paid by workers and the other half paid by employers. Earnings above this amount are not subject to the Social Security portion of the payroll tax or used to calculate retirement payouts.

The maximum amount of wages subject to Social Security taxes will also remain unchanged at $118,500. 15, 2015, the Social Security Administration (SSA) announced that there will be no increase in monthly Social Security benefits in 2016, and that HR professionals won’t have to adjust their payroll tax systems in 2016 for a Social Security FICA increase, as the amount of earned income subject to Social Security taxes won’t change, given the absence of inflation and tepid wage increases over the past year.īut the modest amount of inflation this year was enough to cause small upward adjustments in tax filers’ income tax brackets for 2016. For more about 2017 Social Security earnings limits and other tax adjustments, see theĢ017 Payroll Taxes Will Hit Higher Incomes. Update: Maximum earnings subject to the Society Security payroll tax will increase in 2017.

Tax table for 2016 married couple