FICA taxes include Social Security tax, which covers old age, survivor benefits and disability insurance contributions; and Medicare hospital insurance. Each type has its own withholding rate. The Social Security portion of FICA taxes has a wage base limit, but the withholding rate for Medicare increases if your annual wages exceed $200,000 per year.
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Social Security Withholding
For Social Security tax, the withholding rate is the same for you and your employer. As of the date of publication, the combined tax rate is 12.4 percent on the first $118,500 of your wages, which means that you and your employer each contribute 6.2. percent. However, once your wages reach $118,500, neither you nor your employer owes additional Social Security tax, so you will see no further withholdings throughout the remainder of the tax year.
Medicare Withholding
Medicare withholding differs from Social Security in that there is no upper wage limit. The combined withholding rate for Medicare on wages below $200,000 is 2.9 percent, with you and your employer each contributing 1.45 percent. If your annual wages exceed $200,000, your employer's contribution will remain at 1.45 percent, but your contribution on any amount over the $200,000 threshold will increase to 2.35 percent for the remainder of the current tax year.
Calculating FICA Withholding
If you make $125,000 per year and file single, your annual Social Security contribution will be $7,347, or 6.2 percent of $118,500, the wage base limit. Your employer will also contribute $7,347 for a combined contribution of $14,694. Your annual Medicare contribution will be $1,812.25, or 1.45 percent of $125,000. Your employer will contribute the same amount for a combined annual contribution of $3,624.50. However, if your annual wage is $250,000, you'll pay $4,075 -- 1.45 percent on the first $200,000 and 2.35 percent on $50,000 -- while your employer will pay $3,625 or 1.45 percent on the entire annual wage.
Adjusting Medicare Withholding
People whose tax status is married filing separate may find themselves owing additional Medicare taxes at year's end. This is because even though IRS regulations do not require an employer to increase Medicare withholding until annual wages reach $200,000, the IRS threshold wage for Additional Medicare tax for this tax status is $125,000. To compensate, the IRS says that you should make estimated tax payments the next year or submit a new Form W-4 to increase income tax withholding.
