How much is the FICA tax rate for 2020?

The current FICA tax rate is 7.65% of your employees’ incomes, plus an employer match of 7.65%. This tax is broken up into 6.2% for Social Security and 1.45% for Medicare. The combined contribution, including the tax on your employees’ incomes and the amount you have to match, is 15.3%.

What Is FICA? What Employers Should Know About FICA Taxes

Our mission

Indeed’s Employer Resource Library helps businesses grow and manage their workforce. With over 15,000 articles in 6 languages, we offer tactical advice, how-tos and best practices to help businesses hire and retain great employees.

Read our editorial guidelines

Most employers and their employees are required to pay FICA taxes, a type of payroll tax, to the Internal Revenue Service (IRS). The payment amount for these taxes varies based on how much your employees make.

Learn more about what these taxes entail, including how much to withhold from your employee’s paychecks and how much you’re responsible for paying, in this guide to FICA taxes for employers.

Ready to get started?

Post a Job

Ready to get started?

Post a Job

What is FICA?

Introduced in the 1930s, FICA, or the Federal Insurance Contribution Act, is a U.S. law that requires employers and their employees to make contributions to fund Medicare and Social Security programs. FICA taxes come out of your employee’s paychecks, and as an employer, you typically must match what your employees contribute.

So, how much are FICA taxes? The FICA rate is set annually, although it doesn’t always change each year. For instance, the FICA rate stayed the same from 2019 to 2020. Since it’s based on a set percentage, employees who make a higher income typically pay more in FICA taxes. Although there’s no wage limit for Medicare, the maximum taxable earnings for employees in 2020 is $137,700 for Social Security.

Once an employee makes over $200,000 and files their taxes as unmarried, they must contribute an additional 0.9% in taxes for Medicare — but employers don’t have to match this additional percentage. Other employees who generally must pay an additional 0.9% include those who are married, file their taxes jointly and make $250,000 or more per year, as well as employees who make $125,000 or more per year and file their taxes as married filing separately. You can find this information on your employees’ Form W-4.

How FICA taxes are calculated

Calculate how much your employees owe in FICA taxes by multiplying their gross pay by the Social Security and Medicare tax rates. Once you calculate this total, match how much your employee pays. Follow these general equations:

Social Security calculation: Gross pay x 6.2% = Social Security contribution
Medicare calculation: Gross pay x 1.45% = Medicare contribution
Total FICA taxes calculation: Social Security contribution + Medicare contribution = Total FICA taxes

For example, if an employee’s gross wages are $1,200 per paycheck, you would multiply $1,200 x 6.2% = $74.40 to get their Social Security contribution. Then, take $1,200 and multiply it by the Medicare tax rate of 1.45% to get $17.40. The total FICA tax would be $91.80 per paycheck. Since employers are generally required to match this amount to pay their portion of the FICA tax, you’d also pay $91.80.

Need help running payroll? Consider hiring a payroll specialist.

What payments are not subject to FICA taxes?

Keep in mind that FICA taxes only apply to your employees’ earned income (e.g., salaries, wages, bonuses), not income like dividends, short-term capital gains or pensions. Here are a few other payments that don’t require a FICA withholding:

Any wages you pay after an employee’s death
Any wages you pay to a disabled employee after they became eligible for Social Security benefits
Standard employee expense reimbursements (e.g., travel expenses not exceeding government per diem rates)
Payments to your own children if they’re under 18
Tips that total less than $20 per month
Workers’ compensation

Recent Business taxes articles

See all Business taxes articles

Frequently asked questions about the FICA tax

Since Social Security is a part of the FICA tax,the money from your FICA contribution goes toward Social Security programs, including retirement, disability, survivors and children’s benefits. Qualified retirees and people who are disabled can use these benefits as their partial income. This federal benefits program may also go to the children of beneficiaries.

The government designed Social Security as a way for current employees to support current retirees’ and other beneficiaries’ benefits. When employees and employers pay into this system, they eventually get to reap the benefits later on in life. It’s a way for the workforce to provide retirement funds for all employees.

You need to submit the IRS Form 941 (The Employer’s Quarterly Federal Tax Return) to report your business’ contributions to Medicare and Social Security. At the end of the year, you typically must send each employee a W-2 that outlines their annual wages and taxes withheld.

You may also need to report to your employees how much you’re withholding on each of their paychecks, including how much you’re withholding from the current paycheck and the total FICA tax you’ve withheld for the year to date.