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 are paid by both the employee and employer.
The following rates are used for 2017:
- Social Security rate: 12.4% total
- 6.2% for the employer
- 6.2% for the employee
- $127,200 wage base limit
- Medicare rate: 2.9% total
- 1.45% for the employer
- 1.45% for the employee
Learn more about these rates on the IRS website.
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.
Starting in 2013, an extra .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.