FICA Tax Calculator
Your Estimated FICA Taxes
—Understanding FICA Taxes and How They Are Calculated
FICA, which stands for the Federal Insurance Contributions Act, is a U.S. federal payroll tax that funds Social Security and Medicare. It is a crucial component of the U.S. social insurance system, providing retirement income, disability benefits, and healthcare coverage for eligible individuals. Both employees and employers contribute to FICA taxes, and self-employed individuals pay the equivalent of both portions.
Components of FICA Taxes
FICA taxes consist of two main parts:
- Social Security Tax: This portion funds the Social Security program. It is applied to earned income up to an annual wage base limit, which is adjusted each year for inflation.
- Medicare Tax: This portion funds the Medicare program. It is applied to all earned income, with no wage base limit.
The Tax Rates
The standard FICA tax rates are as follows:
- Employee's Share: 6.2% for Social Security (up to the wage base limit) + 1.45% for Medicare = 7.65% total.
- Employer's Share: 6.2% for Social Security (up to the wage base limit) + 1.45% for Medicare = 7.65% total.
For self-employed individuals, the entire FICA tax is paid through the Self-Employment Contributions Act (SECA) tax, which is effectively double the employee's rate. This amounts to 12.4% for Social Security (up to the wage base limit) and 2.9% for Medicare (on all net earnings from self-employment), totaling 15.3%.
How to Calculate FICA Taxes
Calculating FICA taxes involves understanding the income thresholds and tax rates. Here's a breakdown of the calculation process for an employee:
- Determine Taxable Social Security Income: Take the annual income and compare it to the Social Security wage base limit for the year.
- If the annual income is less than or equal to the wage base limit, the entire annual income is subject to the Social Security tax.
- If the annual income is greater than the wage base limit, only the portion up to the wage base limit is subject to the Social Security tax.
- Calculate Social Security Tax: Multiply the taxable Social Security income by the Social Security tax rate (6.2% for the employee).
- Determine Taxable Medicare Income: The Medicare tax applies to all earned income, regardless of the wage base limit. So, the full annual income is used for this calculation.
- Calculate Medicare Tax: Multiply the annual income by the Medicare tax rate (1.45% for the employee).
- Total Employee FICA Tax: Sum the calculated Social Security tax and Medicare tax.
Example Calculation (Employee):
Let's assume an employee earns $75,000 annually and the Social Security wage base limit for the year is $168,600 (this is the limit for 2024).
- Social Security Taxable Income: $75,000 (since it's less than $168,600)
- Social Security Tax: $75,000 * 0.062 = $4,650
- Medicare Taxable Income: $75,000
- Medicare Tax: $75,000 * 0.0145 = $1,087.50
- Total Employee FICA Tax: $4,650 + $1,087.50 = $5,737.50
Example Calculation (Exceeding Social Security Limit):
Now, consider an employee earning $200,000 annually, with the same Social Security wage base limit of $168,600.
- Social Security Taxable Income: $168,600 (limited to the wage base)
- Social Security Tax: $168,600 * 0.062 = $10,453.20
- Medicare Taxable Income: $200,000
- Medicare Tax: $200,000 * 0.0145 = $2,900
- Total Employee FICA Tax: $10,453.20 + $2,900 = $13,353.20
Additional Medicare Tax
It's important to note that higher earners may also be subject to an Additional Medicare Tax of 0.9% on earned income that exceeds certain thresholds ($200,000 for single filers, $250,000 for married couples filing jointly). This additional tax is paid only by the employee and is not matched by the employer. The standard Medicare tax rate of 1.45% still applies up to these thresholds.
Why Use a FICA Calculator?
A FICA calculator helps individuals and businesses quickly estimate their tax obligations. It's useful for:
- Employees: To understand how much of their paycheck goes towards Social Security and Medicare.
- Employers: To budget for payroll taxes.
- Self-Employed Individuals: To estimate their SECA tax liability.
- Financial Planning: To forecast net income and plan for retirement and healthcare expenses.
Always consult with a qualified tax professional for personalized advice, as tax laws and limits can change annually.