Federal Insurance Contributions Act (FICA) Withholding for Social Security and Medicare
As employers, state agencies and institutions of higher education are required by the Federal Insurance Contributions Act (FICA) to deduct employment taxes from the wages of a state officer or employee. Employers must withhold a set percentage of an employee’s salary each pay period. FICA requires that the employer match the employee’s amount and contribute the money to a government account known as the Social Security Trust Fund. This fund provides retirement income, as well as disability insurance, Medicare and benefits for survivors.
The Social Security tax rate is 6.2 percent and the Hospital Insurance (Medicare) tax rate is 1.45 percent, for a total FICA tax rate of 7.65 percent. The combined employee-employer FICA tax rate is 15.3 percent.
NOTE: For 2011 and 2012 only, the employee’s tax rate for Old-Age, Survivors and Disability Insurance (Social Security) was lowered to 4.2 percent, while the employer’s rate remained unchanged at 6.2 percent. The Hospital Insurance (Medicare) tax rate remained unchanged for both employee and employer at 1.45 percent. This change made the FICA tax rate for employees 5.65 percent, and the combined employee-employer FICA tax rate 13.3 percent for 2011 and 2012.
Social Security tax is applied only up to a certain wage base, currently $137,700. Wage limits for the calendar year can be found at the U.S. Social Security Administration. There is no wage limit for the Medicare deduction.
Beginning in 2013, wages paid in excess of $200,000 are subject to an extra 0.9 percent Medicare tax that will only be withheld from employees’ wages. Employers will not pay the extra tax.
- All remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.
Note: There are many exceptions to this definition that are beyond the scope of this guide.
Internal Revenue Code, Sections 3101(a), (b)(6), 3102(a), 3121(a); 42 United States Code Annotated Section 430 (West Supp. 1999); Treasury Regulations, Section 31.3102-1(a) (1969); Cost-of-Living and Other Determinations for the Year 2000, 64 Federal Register 57508 (1999); Texas Government Code, Sections 606.003 (Vernon 2004), 606.063 – 606.064, 606.066 – 606.069 (Vernon 2004), 659.002(d) (Vernon 2004).
|01/02/2019||Updated with new Social Security wage base for 2019.|
|01/14/2015||Updated with new Social Security wage base for 2015.|
|03/19/2013||Updated with new Social Security wage base for 2013 and the additional Medicare tax.|