How Does Payroll Calculate Social Security, Medicare, and FICA Taxes?

Published: August 2026 | Last updated: August 2026

Short answer: Payroll calculates FICA tax by withholding 6.2% of wages for Social Security and 1.45% for Medicare from each employee, then matching both amounts as the employer. Social Security tax stops once an employee’s wages reach the annual wage base limit, set at $184,500 for 2026 (last verified July 2026). Medicare tax has no wage limit, and wages above $200,000 in a calendar year trigger an extra 0.9% employee-only withholding called the Additional Medicare Tax.

That is the mechanical answer. Underneath it, payroll runs two separate calculations every pay period. One is Social Security tax, capped at a dollar limit that changes each year. The other is Medicare tax, which never caps and can increase mid-year once a high earner crosses a threshold.

What is FICA?

FICA stands for the Federal Insurance Contributions Act, the federal law that funds Social Security and Medicare through payroll taxes.

FICA has two parts. The Social Security portion, formally Old-Age, Survivors, and Disability Insurance, funds retirement, disability, and survivor benefits. The Medicare portion, Hospital Insurance, funds Medicare Part A. Employers and employees each pay a share of both taxes, and the rates are fixed by statute rather than adjusted every year the way some other payroll figures are (IRS Publication 15, Circular E, Employer’s Tax Guide).

What this is

This is an explanation of how payroll calculates and withholds Social Security and Medicare tax under FICA, including the current wage base limit and the Additional Medicare Tax.

It covers the Social Security and Medicare tax rates, the 2026 Social Security wage base, why Medicare tax has no cap, and how the Additional Medicare Tax applies to higher earners.

This article focuses on federal law. Some states apply their own additional payroll taxes, such as state disability or paid family leave programs, on top of FICA. Those are separate from FICA and outside the scope of this piece.

What this is not

This is not legal or tax advice. This is not a guide to state payroll taxes, self-employment tax filing, or federal income tax withholding, which follow separate rules. This is not a substitute for a qualified tax professional’s review of a specific payroll situation. A qualified legal or tax professional should confirm any binding decision.

How much is the Social Security tax rate?

The Social Security tax rate is 6.2% for the employee and 6.2% for the employer, for a combined 12.4%.

Payroll withholds 6.2% from each employee’s wages up to the annual wage base limit, then matches that amount as an employer contribution. The rate itself has stayed fixed in recent years. What changes annually is the wage base limit (Social Security Administration, Contribution and Benefit Base; IRS Publication 15).

How much is the Medicare tax rate?

The Medicare tax rate is 1.45% for the employee and 1.45% for the employer, for a combined 2.9%, and it applies to all covered wages with no upper limit.

Unlike Social Security tax, Medicare tax does not stop once an employee crosses a wage threshold. Every dollar of covered wages is subject to the 1.45% employee rate and the matching 1.45% employer rate (IRS Topic no. 751, Social Security and Medicare Withholding Rates).

What is the Social Security wage base limit for 2026?

The Social Security wage base limit for 2026 is $184,500, up from $176,100 in 2025 (Social Security Administration, last verified July 2026).

Once an employee’s year-to-date wages reach that limit, payroll stops withholding the 6.2% Social Security tax for the rest of the calendar year, and the employer’s matching 6.2% stops at the same point. An employee who earns exactly the 2026 wage base limit pays $11,439.00 in Social Security tax for the year, and the employer pays the same amount (Social Security Administration, Contribution and Benefit Base).

What is the Additional Medicare Tax?

The Additional Medicare Tax is an extra 0.9% employee-only Medicare withholding that applies once an employee’s wages from one employer exceed $200,000 in a calendar year.

Payroll must begin withholding the additional 0.9% in the same pay period wages cross $200,000, and continue through the end of the year. There is no employer match for this portion. An employee’s actual liability depends on filing status: the threshold is $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for single filers, heads of household, and qualifying surviving spouses. The employer withholding trigger, however, is always $200,000, regardless of the employee’s filing status (IRS Topic no. 751, Additional Medicare Tax).

Important facts and data

The combined FICA rate is 15.3% of wages up to the Social Security wage base: 12.4% for Social Security and 2.9% for Medicare, split evenly between employee and employer. The 2026 Social Security wage base is $184,500. Medicare tax has no wage base limit. The Additional Medicare Tax rate is 0.9%, withheld only from the employee, starting once wages from one employer exceed $200,000 in the year. Self-employed individuals pay both the employee and employer shares through self-employment tax, at the same combined 12.4% Social Security and 2.9% Medicare rates (Social Security Administration, Contribution and Benefit Base).

Common misunderstandings about FICA tax

“FICA is a flat tax on all income.” False. FICA applies to wages and self-employment income. Investment income and most retirement distributions are not subject to it.

“Medicare tax stops once an employee hits the Social Security wage base.” False. Only Social Security tax stops at the wage base. Medicare tax continues on every dollar earned.

“The Additional Medicare Tax has an employer match.” False. The 0.9% Additional Medicare Tax is withheld from the employee only. Employers do not pay a matching share.

“An employee cannot have more than the annual maximum withheld for Social Security.” False. Each employer withholds Social Security tax independently up to the wage base. An employee who works for two employers in the same year can have more withheld in total than the annual maximum, and can claim the excess as a credit when filing (IRS Topic no. 608, Excess Social Security and RRTA Tax Withheld).

Real-world examples

An employee earns $210,000 in 2026 from one employer. Payroll withholds 6.2% Social Security tax on the first $184,500 of wages, then stops. Payroll withholds 1.45% Medicare tax on the full $210,000, and once wages cross $200,000, adds the 0.9% Additional Medicare Tax on the $10,000 above that threshold.

An employee works for two employers in 2026, earning $120,000 from each, for $240,000 in total wages. Each employer withholds 6.2% Social Security tax independently up to its own tracking of that employee’s wages, since employers do not share wage data with each other. The employee ends up with more Social Security tax withheld than the 2026 annual maximum of $11,439.00, and claims the excess as a credit on Schedule 3 of Form 1040.

What should employers do?

Confirm payroll is tracking each employee’s year-to-date wages accurately, so Social Security withholding stops at the correct wage base and Additional Medicare Tax withholding starts on time at $200,000. Remember a new employer does not inherit wage data from a previous employer, so a rehire or new hire’s withholding starts fresh regardless of what a prior employer withheld that year. Review whether any family employees qualify for the FICA exemption for a child under 18 working in a parent’s sole proprietorship or in a partnership where each partner is the child’s parent (IRS, Family employees).

What should employees know?

Social Security tax stops for the year once wages reach the annual wage base, so take-home pay can rise slightly late in the year for higher earners. Medicare tax never stops. Employees with two or more employers in the same year may have more Social Security tax withheld than the annual maximum, and can recover the excess through a credit on their federal income tax return.

How Journey Payroll & HR Can Help?

Journey Payroll & HR helps employers stay informed on payroll tax obligations as rules and limits change each year. For questions about how FICA applies to your business, reach out to your Journey representative or visit JourneyPayrollHR.com.

Frequently asked questions

Is FICA the same thing as Social Security tax?

No. FICA is the combined federal payroll tax that includes both Social Security tax and Medicare tax. Social Security tax is only one part of it.

Do employers pay FICA tax, or only employees?

Both. Employers match the employee’s Social Security and Medicare withholding dollar for dollar. The Additional Medicare Tax is the one exception, since it has no employer match.

What happens to withholding once an employee’s wages pass the Social Security wage base?

Social Security withholding stops for the rest of the calendar year. Medicare withholding continues on every dollar earned, with no limit.

Does every employee pay the Additional Medicare Tax?

No. It only applies once wages from a single employer exceed $200,000 in a calendar year. Most employees never reach that level of wages from one employer.

How do self-employed workers pay FICA?

Self-employed individuals do not have an employer to split the tax with, so they pay both shares themselves through self-employment tax, at the same combined 12.4% Social Security and 2.9% Medicare rates.

Does the FICA rate change every year?

The 6.2% and 1.45% rates are set by statute and have stayed the same in recent years. The Social Security wage base is what changes annually, based on national wage growth.

Final takeaway

Payroll calculates FICA tax by withholding 6.2% for Social Security and 1.45% for Medicare from each employee, matching both as the employer, and stopping Social Security withholding once wages hit the annual wage base, which is $184,500 for 2026. Medicare tax keeps applying with no cap, and an extra 0.9% Additional Medicare Tax kicks in on wages above $200,000 from one employer.

For employers, the rule to remember is this: Social Security tax has a ceiling, Medicare tax does not, and the Additional Medicare Tax is the one FICA cost that falls on the employee alone.

This article is for general information and is not legal or tax advice. State and local payroll tax rules may differ. A qualified tax professional should confirm any decision specific to your business.