Social Security and Medicare Tax: Rates and Wage Bases

Social Security and Medicare taxes — collectively called FICA taxes under the Federal Insurance Contributions Act — fund two of the largest federal benefit programs in the United States. This page covers the applicable rates, wage base limits, split obligations between employers and employees, and the special rules that apply to self-employed individuals, high earners, and certain exempt workers. Understanding these mechanics is essential context for anyone analyzing payroll tax requirements or modeling total compensation costs.

Definition and scope

FICA encompasses two distinct taxes imposed on wages and self-employment income under the Internal Revenue Code:

1. Social Security tax — finances the Old-Age, Survivors, and Disability Insurance (OASDI) program administered by the Social Security Administration (SSA).
2. Medicare tax — finances hospital insurance (HI) under Medicare Part A, administered by the Centers for Medicare & Medicaid Services (CMS).

Both taxes are collected by the IRS under authority granted in IRC §§ 3101–3128 (employee and employer FICA) and §§ 1401–1403 (Self-Employment Contributions Act, or SECA, for self-employed individuals). The IRS publishes current rates and wage bases annually in Publication 15 (Circular E), Employer's Tax Guide.

A critical structural feature distinguishes the two components: the Social Security tax applies only up to an annual wage base ceiling, while the basic Medicare tax applies to all covered wages with no ceiling. A supplemental Medicare surtax layer applies above a separate income threshold, discussed in the Decision boundaries section.

How it works

Rate structure

For the 2024 tax year (IRS Revenue Procedure 2023-34), the combined FICA rates are:

Social Security wage base

The Social Security tax applies only to wages up to the annual wage base. For 2024, that ceiling is $168,600 (SSA Fact Sheet on COLA 2024). Wages above this threshold are not subject to the 6.2% Social Security tax for either the employee or the employer. The wage base is indexed annually to the national average wage index published by SSA.

Medicare wage base

There is no ceiling on wages subject to the standard 1.45% Medicare tax. Every dollar of covered wages is subject to this rate regardless of annual total.

Employer withholding mechanics

Employers withhold the employee share of FICA from each paycheck, match it with an equal employer contribution, and remit the combined amount to the IRS on a deposit schedule determined by the employer's total tax liability. The mechanics of deposit timing and employer obligations are detailed in IRS Publication 15 and are closely related to tax withholding and Form W-4 procedures.

Self-employment (SECA)

Self-employed individuals pay the full 15.3% combined rate on net self-employment income — both the employee and employer shares — because no separate employer exists to pay the employer half. However, IRC § 164(f) allows a deduction for one-half of the self-employment tax when calculating adjusted gross income, partially offsetting the burden. The self-employment tax obligations page covers SECA mechanics in greater depth, including the net earnings calculation.

Common scenarios

Scenario 1 — Employee earning below the Social Security wage base

An employee earning $85,000 in wages pays 6.2% Social Security tax on the full $85,000 ($5,270) plus 1.45% Medicare tax ($1,232.50), for a total employee FICA contribution of $6,502.50. The employer matches each figure identically.

Scenario 2 — Employee exceeding the wage base

An employee earning $220,000 pays 6.2% Social Security tax only on the first $168,600 ($10,453.20), then 0% on the remaining $51,400 for Social Security. Medicare tax at 1.45% continues on all $220,000 ($3,190). Additionally, the Additional Medicare Tax of 0.9% applies to the $20,000 that exceeds the $200,000 withholding threshold for single filers (see Decision boundaries). The employer does not match the 0.9% surtax.

Scenario 3 — Multiple employers in one year

When a worker holds two jobs simultaneously, each employer independently withholds Social Security tax up to the $168,600 wage base without knowledge of the other employer's withholding. If combined wages exceed $168,600, the employee will have over-withheld Social Security tax and can claim a refund of the excess as a credit on Form 1040. Employers are not entitled to a corresponding refund for their employer share.

Scenario 4 — Gig economy and independent contractors

Workers classified as independent contractors do not have FICA withheld by a payer. Instead, they owe SECA on net self-employment income. This intersects with gig economy tax obligations and 1099 reporting requirements, where misclassification can create substantial back-tax exposure.

Decision boundaries

Additional Medicare Tax (0.9%)

The Affordable Care Act added IRC § 3101(b)(2), imposing an additional 0.9% Medicare surtax on wages exceeding:

• $200,000 for single filers and heads of household
• $250,000 for married filing jointly
• $125,000 for married filing separately

Employers are required to withhold this surtax once an individual employee's wages from that employer exceed $200,000 in a calendar year, regardless of the employee's filing status or other income. Final liability is reconciled on Form 1040 because the actual threshold depends on combined household income. This surtax also applies to SECA income for self-employed individuals.

Net Investment Income Tax (NIIT) — distinct from FICA

The NIIT under IRC § 1411 is frequently confused with the Additional Medicare Tax but applies to passive investment income (dividends, capital gains, rental income), not wages. It carries the same 3.8% ceiling threshold structure for high earners. The net investment income tax page separates these two distinct surtaxes in detail.

Exempt employment categories

Not all wages are subject to FICA. Statutory exclusions include:

1. Certain student workers employed by a school, college, or university where the student is enrolled and regularly attending classes (IRC § 3121(b)(10))
2. Certain nonresident alien employees on specific visa categories
3. Members of recognized religious sects that have filed for exemption under IRC § 1402(g)
4. Certain state and local government employees covered by a Section 218 Agreement with SSA rather than FICA

Determining applicable exclusions requires review of IRC § 3121(b) and the applicable SSA Section 218 Agreement framework, detailed in SSA's Section 218 Agreements guidance.

Comparing employee vs. self-employed status

The structural difference between FICA (employee) and SECA (self-employed) creates a significant decision boundary in worker classification disputes. An employee pays 7.65% on covered wages with the employer absorbing the matching 7.65%. A self-employed individual faces the full 15.3% on net earnings, offset only partially by the above-the-line deduction. This distinction is directly relevant to individual income tax filing requirements and the broader question of how compensation structure affects total federal tax burden covered in the federal tax brackets and rates resource.

References

• IRS Publication 15 (Circular E), Employer's Tax Guide
• IRS Revenue Procedure 2023-34 (2024 inflation adjustments)
• Social Security Administration — COLA 2024 Fact Sheet
• Social Security Administration — Section 218 Agreements
• Internal Revenue Code § 3101 (26 U.S.C. § 3101) — FICA employee tax
• Internal Revenue Code § 1401 (26 U.S.C. § 1401) — SECA tax
• Internal Revenue Code § 3121 (26 U.S.C. § 3121) — FICA definitions and exclusions
• IRS Topic No. 751 — Social Security and Medicare Withholding Rates
• Centers for Medicare & Medicaid Services — Medicare Program Overview