Building Your Business Business Taxes How To Calculate Social Security and Medicare Taxes Employers Must Share FICA Payments With Employees By Jean Murray Jean Murray Facebook Twitter Jean Murray, MBA, Ph.D., is an experienced business writer and teacher who has been writing for The Balance on U.S. business law and taxes since 2008. She has taught accounting, business law, and business finance at business and professional schools for over 35 years, has authored several books on saving money and simplifying your business, and was the owner of startup-focused company Emence Enterprises, LLC. learn about our editorial policies Updated on October 14, 2022 In This Article View All In This Article How FICA Taxes Are Calculated Self Employment FICA Taxes FICA Tax Withholding Rates Withholding Calculations Employer's Portion of FICA Taxes FICA Tax Overpayment Reporting FICA Tax Withholding Frequently Asked Questions (FAQs) Photo: RyanJLane / Getty Images Every person working in the United States as an employee must have FICA (Federal Insurance Contributions Act) taxes withheld from every paycheck by law. FICA taxes include taxes for both Social Security and Medicare, and it is shared by employees and employers, so half of the tax is deducted from your paychecks when you work as an employee. The other half, an amount equal to the total deducted from employee paychecks, must be paid by your employer. The following provides a step-by-step guide on how to calculate FICA taxes. Key Takeaways FICA taxes total 15.3%, but employers split this cost with employees.Self-employed individuals pay the entire FICA tax on their own.FICA taxes include a 12.4% Social Security tax, although income isn't taxed beyond a certain threshold.FICA taxes also include a 2.9% Medicare tax, and high-income individuals will pay an additional 0.9% toward Medicare. How FICA Taxes Are Calculated To calculate the impact FICA taxes have on your paycheck, you will need to know: The amount of gross pay for the pay period The total year-to-date gross pay The Social Security and Medicare withholding rates for that year Any amounts deducted from your pay for pre-tax retirement plans Note The portion of your pay that's subject to Social Security and Medicare taxes may be different from your gross pay, so it is vital that you understand what is included and what is not in Social Security wages. Social Security Income Cap This is the maximum amount of your wages or salary that'll be subject to Social Security withholding for that year. Each year the Social Security Administration publishes a maximum Social Security amount. No Social Security withholding is taken from employee pay above this amount. The Additional Medicare Tax This is the amount at which additional Medicare taxes must be withheld from your pay. The pay amount is different depending on your tax status, such as whether you're single ($200,000) or married filing jointly ($250,000). Income after the applicable threshold incurs an additional 0.9% tax. Self Employment FICA Taxes Self-employed individuals do not have an employer taking on half of their FICA tax payments. In other words, a self-employed individual is personally responsible for double the FICA taxes of an employed individual. FICA Tax Withholding Rates There are two different rate components: The Social Security (OASDI) withholding rate is gross pay times 6.2% up to that year's Social Security income cap. This is your portion of the Social Security payment. The employer pays 6.2% with no limit. The Medicare withholding rate is gross pay times 1.45%, although high-income individuals will pay an additional 0.9%. The employer also pays 1.45% with no limit, but they don't pay any additional tax. The total withheld is 7.65% of your gross pay (unless additional Medicare taxes apply). Withholding Calculations Begin your calculation with your gross pay amount for a given pay period, then calculate the Social Security and Medicare withholding. Calculate Gross Pay The gross pay for a salaried employee is the amount of salary for that period (the annual salary divided by the number of pay periods). Note For example, Sally's annual salary is $31,000. She is paid twice a month (24 pay periods in the year), so each gross pay for each paycheck is $31,000 divided by 24, or $1,291.67. The gross pay for an hourly employee is calculated by multiplying the number of hours worked in a pay period times the hourly rate, and including hours for overtime at the overtime rate. Note For example, Carlos worked 44 hours during a week at $12.50 an hour:First, multiply 40 hours x $12.50 = $500.Then multiply four overtime hours x $18.75 (1.5 times the hourly rate) = $75.00Add $500 + $75 for a total of $575 in gross wages for the week. Determine the amount of pay subject to FICA taxes based on the percentages above. Eliminate any amounts that are not subject to these taxes. Social Security Withholding Multiply the current Social Security tax rate by the gross wages subject to Social Security taxes. In Sally's example above (assuming all of her wages are included for Social Security purposes), her FICA withholding for each paycheck would be $98.81. Note If your income surpasses the Social Security income cap, then double-check to ensure that your employer has stopped withholding Social Security taxes. Medicare Withholding Multiply the Medicare tax rate by the gross wages subject to Medicare taxes. Check to see if the employee has reached the additional Medicare tax level and increase deductions from the employee's pay. You must also multiply wages by the 0.9% additional Medicare tax if your income surpasses the threshold for your tax situation. Employer's Portion of FICA Taxes The employer's portion of FICA taxes includes: 6.2% of the employee's total FICA wages for Social Security, with no maximum1.45% of the employee's total FICA wages for Medicare (not the additional 0.9%) FICA Tax Overpayment If an employer deducted too much of your pay, either for Social Security or for Medicare tax, the employer will have to follow a few steps to correct the situation. Refund the Employee The employer will pay you back for the excess deduction amount. This amount may be added to your next paycheck or issued as a separate check. File a Corrected 941 If the mistake was included in Form 941 (quarterly payroll) report, the employer will need to file a correction form (941-X) to receive a refund. Change the Employee's Payroll Record The employer will deduct the overpayment of Social Security taxes from your payroll tax record. The W-2 Form for an employee who earns more than the income cap should show the total amount of pay earned for the year as well as the income cap. Medicare wages will be the same as the total amount of pay. Reporting FICA Tax Withholding Employers handle FICA tax reporting. Employers must report FICA tax withholding: To the employee on each paycheck, including both the withholding amount for the current pay and total amount of FICA tax withheld for the year to date To the IRS on Form 941- the Employer's Quarterly Wage and Tax Report On the employee's W-2 form at the end of the year Some employees may want to claim an exemption from federal income tax withholding. This exemption has nothing to do with FICA taxes; you must still withhold FICA tax from each paycheck for all employees. Frequently Asked Questions (FAQs) How do you calculate the Medicare tax rate? Unless the government changes tax law, the Medicare tax rate is always 2.9%. Employed individuals only pay half of this rate (1.45%), and their employers pay the other half. High-income individuals pay an additional 0.9%. What is the Medicare tax limit? The Medicare tax is not limited to an annual income cap, although the Social Security tax is. For 2022, the Social Security tax is limited to the first $147,000 you earn, and for 2023, it's $160,200. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning! Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Internal Revenue Service. "Topic No. 751 Social Security and Medicare Withholding Rates." Social Security Administration. "Maximum Taxable Earnings." Internal Revenue Service. "Topic No. 560 Additional Medicare Tax." Internal Revenue Service. "Self-Employment Tax (Social Security and Medicare Taxes)." Internal Revenue Service. "About Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund." Internal Revenue Service. "Topic No. 608 Excess Social Security and RRTA Tax Withheld." Internal Revenue Service. "Depositing and Reporting Employment Taxes." Social Security Administration. "Fact Sheet Social Security."