Federal Insurance Contributions Act (FICA)

The Federal Insurance Contributions Act (FICA) includes:

These taxes help support retired workers and people with disabilities. Both employees and employers pay a portion of these taxes based on a percentage of taxable wages.

Gusto handles these tax payments if they are withheld from payroll.

2024 rates—Social Security, Medicare, and Additional Medicare

Go the IRS website to learn more about the rates.

Social Security tax

  • Total rate: 12.4%
    • 6.2% paid by the employer
    • 6.2% paid by the employee
  • Wage base limit: $168,600
    • After this, no more Social Security tax is taken out for the year.
    • This limit typically changes each year.

Medicare tax

  • Total rate: 2.9%
    • 1.45% paid by the employer
    • 1.45% paid by the employee

Additional Medicare tax

Employees making over $200,000 a year will have to pay an extra 0.9% in Medicare tax. Employers do not have to match this extra amount, but they do need to withhold it from the employee's pay.

The employee's W-4 elections only impact the Medicare tax they pay, not how much an employer pays.

Example tax breakdown and calculation (includes unemployent taxes)

Meet "Taylor"

  • Annual Salary: $200,000
  • Year: 2024
  • Employer: Same employer for the entire year
  • Location: State with a State Unemployment Insurance (SUI) wage base limit of $10,000

Tax breakdown

  1. Social Security Tax
    • Wage base limit: $168,600
    • Rate: 12.4% total → 6.2% employee + 6.2% employer
    • Result: Social Security tax applies to only the first $168,600 of Taylor’s wages.
      • Earnings beyond this amount are not taxed for Social Security.
  2. Medicare Tax
    • No wage base limit (Medicare taxes apply to all earnings)
    • Rate: 2.9% total → 1.45% employee + 1.45% employer
    • Result: Medicare tax applies to the full $200,000 of Taylor’s wages.
  3. Additional Medicare Tax
    • Threshold: Earnings over $200,000
    • Rate: 0.9% (employee only)
    • Result: Since Taylor’s earnings are exactly $200,000, the Additional Medicare Tax does not apply.
  4. Federal Unemployment Tax Act (FUTA)
    • Wage base limit: $7,000
    • Result: FUTA applies only to the first $7,000 of Taylor’s wages.
  5. State Unemployment Insurance (SUI)
    • Wage base limit: $10,000 (varies by state)
    • Result: SUI tax applies only to the first $10,000 of Taylor’s wages.

Example calculations

Tax type Wage base limit Rate Taylor's wages Wages taxed Employer share Employee share
Social Security $168,600 6.2% (employee + employer) $200,000 $168,600 $10,453.20 $10,453.20
Medicare No limit 1.45% (employee + employer) $200,000 $200,000 $2,900.00 $2,900.00
Additional Medicare Tax > $200,000 0.9% (employee only) $200,000 $0 (doesn’t apply) N/A $0
FUTA $7,000 Employer only $200,000 $7,000 $420.00 N/A
SUI $10,000 Varies by state (example 2%) $200,000 $10,000 $200.00 N/A