FICA & SECA Tax Rates

You must also file Form 8959, Additional Medicare Tax, to compute any Additional Medicare Tax due. Attach Forms 8919 and 8959 to your income tax return (Form 1040 or 1040-SR). All wages that are currently subject to Medicare Tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual’s filing status. For more information on what wages are subject to Medicare Tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15, (Circular E), Employer’s Tax Guide.

  • Medicare services may be cut, or lawmakers may find other ways to finance these benefits.
  • Employers have numerous payroll tax withholding and payment obligations.
  • A flat tax percentage is calculated and deducted from your salary.

While both these taxes use the gross wages of the employee as the starting point, they are two separate components that are calculated independently. The Medicare and Social Security taxes rarely affect your federal income tax or refunds. The federal income tax is a progressive tax that is affected by your tax filing status. This means that the higher your income, the higher the tax rate. The individual tax rates can range from ten to thirty-seven percent. The current wage base limit states FICA’s tax rate for Social Security can only be applied to the first $168,600 of an employee’s annual wages.

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This amount is split evenly between an employer and employee, each paying 1.45%. Net investment income may include taxable interest, dividends, nonqualified annuities, capital gains, and rental income. It does not include income excluded for income tax purposes, such as tax-exempt municipal bond interest. Net investment income tax is applied to an individual’s net investment income or the excess modified adjusted gross income (MAGI) over certain thresholds, whichever is less.

A has $200,000 in wages and B has $100,000 in self employment income. A is liable for Additional Medicare Tax on $75,000, the amount by which A’s wages exceed the $125,000 threshold for married filing separate. B’s self-employment income of $100,000 does not exceed the $125,000 threshold, so B does not owe Additional Medicare Tax. Also, when calculating your federal income tax, you can claim deductions for things like student loan interest, mortgage interest, state and local taxes, and contributions to a charitable organization.

Wages Exempt From FICA Tax

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However, if you make more than $200,00 in a year, you will owe an additional Medicare tax on those extra earnings. That way, it can keep running until you’re ready to retire or you have a disability. The tax is smaller than the rest of FICA, but it’s an important part of taxes overall.

How Much FICA Do I Have to Pay?

Tax season is upon us, but the road ahead doesn’t have to feel daunting. We’re breaking down the terms, forms and deadlines you need to know to responsibly file your taxes in 2023 – starting with FICA. Your employer is also responsible for paying half of the total FICA obligation. A worker is an employee if the employer has the right to direct and control their work. The employer doesn’t have to actually direct or control the worker but has the right to do so.

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Use our W-4 Calculator to help you determine how to boost your refund or your take home pay. You can fill out an updated form and submit it to your employer at any time. FICA taxes also go to Medicare programs that fund older and certain disabled Americans’ health care costs. When you’re old enough, FICA funds collected from those still in the workforce will pay your benefits. No, FICA and Social Security taxes are not the same, but they’re related.

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Since $50,000 is below H’s $200,000 threshold, H does not owe Additional Medicare Tax. D has $150,000 in wages and E has $175,000 in self-employment income. This tax is actually a regressive tax in that it only applies to a certain amount of earned income each year, known as the contribution and benefit base, which increases most years due to inflation. “Students that perform services for a school, college, or university where the student is pursuing a course of study” are exempt from paying the FICA tax. FICA, the Federal Insurance Contributions Act, refers to the taxes that largely fund Social Security retirement, disability, survivor, spousal and children’s benefits. If you’re having trouble finding the Social Security tax deduction on your pay stub, don’t worry.

FICA and Medicare Taxes Don’t Have to Be Scary

The employee may need to make estimated tax payments to cover any shortage. More information about this process of giving an employer money for taxes is available in Publication 531, Reporting Tip Income. On December 1, 2013, M’s employer paid her a bonus of $50,000.

The Social Security tax withheld from employees is then matched by the employer. As a result, the total Social Security tax in 2024 is equal to 12.4% of each employee’s annual earnings up to a maximum earnings amount of $168,600. Publication 15-A, section 7 contains more information on common paymasters.


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