8571 / What are the Social Security and Medicare tax rates for traditional employees and employers?

The Social Security tax and Medicare tax rates that apply to the wage income of a wage earner are the same as those applicable to the self-employment income of a self-employed individual. However, the operative statute for the imposition of payroll taxes on wage earners is the Federal Insurance Contributions Act (the “FICA tax”).¹ Unlike the self-employed, the liability for FICA tax imposed on the wages of a wage earner is split equally between the employee and the employer. In other words, the employee and the employer are each responsible for 6.2 percent of the 12.4 percent of Social Security tax and for 1.45 percent of the 2.9 percent of Medicare tax.²

Although the Social Security tax rate is much higher than the Medicare tax rate, it only applies to wages that do not exceed the earnings cap (as adjusted annually for inflation). Therefore, wages in excess of the cap amount are not subject to Social Security tax. For 2025, the Social Security tax does not apply to wages in excess of $176,100 (the amount was $168,600 in 2024).³ Thus, the maximum amount of Social Security tax liability for the combined employee and employer share is $21,836.40 (12.4% * $176,100), or $10,918.20 each.

On the other hand, there is no cap on the Medicare tax. This means the combined employer/employee 2.9 percent tax rate will be imposed on all wages without limit. Therefore, for 2025, although the imposition of Social Security tax ceases to apply to wages in excess of $176,100, the Medicare tax continues to be imposed on all wages. Moreover, effective for tax years beginning after December 31, 2012, there is an additional Medicare surtax of 0.9 percent added to the 1.45 percent rate on the employee portion of the Medicare tax for certain high-income taxpayers (see Q 8657).

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[1].     Codified as Chapter 21 of the Internal Revenue Code, IRC §§ 3101-3128.

[2].     IRC §§ 3101(a), 3111(a), 3101(b) and 3111(b).