3580 / What is the wage base subject to FICA and FUTA taxes for deferred compensation arrangements?
Medicare Hospital Insurance Portion and Health Care Reform Changes
There is no taxable wage base cap for the Medicare hospital insurance (“HI”) portion of the FICA tax, so all deferred compensation counted as wages for FICA purposes is subject to at least the hospital portion of the FICA tax without limit.1 There also is no earnings base cap for the hospital insurance portion of the SECA tax.2
Currently, the Medicare payroll tax on all wages is 2.9 percent, with the employer and employee each paying 1.45 percent. The Medicare payroll tax rate for the employee was raised to 2.35 percent beginning January 1, 2013 for individuals making more than $200,000 and couples making more than $250,000 annually. Also, a 3.8 percent Medicare tax on the lesser of “investment income” or the amount of adjusted gross income in excess of the income breakpoints became effective January 1, 2013 on individuals making more than $200,000 of specially defined adjusted gross income concerning investment and other income, and couples making $250,000 ($125,000 for married couples filing separately).3