Federal insurance contributions act (FICA)

The federal insurance contributions act (FICA) consists of Social Security and Medicare taxes. It was created to help provide for retired workers and the disabled. The tax is calculated using flat percentages of taxable wages and is paid by both the employee and employer.

The following rates will be used for 2023. Learn more about these rates on the IRS website.

• Social Security rate: 12.4% total
  • 6.2% for the employer
  • 6.2% for the employee
  • $160,200 wage base limit
• Medicare rate: 2.9% total
  • 1.45% for the employer
  • 1.45% for the employee

Social Security

Of the two of these, only Social Security has a wage base limit that frequently sees annual increases. Once an employee reaches the Social Security wage base limit within the calendar year, Social Security tax is no longer calculated on additional wages.

Medicare

Starting in 2013, an extra 0.9% in Medicare tax will be added to employees with annual wages over $200,000. Employers are not required to match the additional tax but are expected to withhold the amount from qualifying employees.

Keep in mind: an employee's filing status will impact the amount of additional Medicare tax owed, but will not impact the employer amount owed.