Your payroll tax rate depends on your income and filing status, not on your employer or industry

The amount of payroll tax you pay is set by federal law and does not change based on where you work or what you do. Social Security tax is 6.2% of your wages up to a yearly cap (the cap changes each year). Medicare tax is 1.45% of all your wages with no cap. If you earn over $200,000 as a single filer (or $250,000 married filing jointly), you pay an additional 0.9% Medicare tax on the amount above that threshold. Your employer pays an equal amount for Social Security and Medicare on your behalf, but that money does not show up on your paycheck.

The total you see withheld from your pay stub each period is the employee portion only. For most workers, that means 7.65% of gross wages goes to Social Security and Medicare combined, plus any additional Medicare tax if you cross the income threshold. Self-employed people pay both the employee and employer portions, which totals 15.3% before the additional Medicare tax.

Key Takeaways

  • Social Security tax is 6.2% of wages up to an annual cap that the IRS adjusts each year; Medicare tax is 1.45% of all wages with no limit.
  • Your employer withholds these amounts from your paycheck, and you see them listed separately on your pay stub as FICA or payroll tax.
  • If you earn over $200,000 (single) or $250,000 (married filing jointly), you owe an extra 0.9% Medicare tax on income above those thresholds.
  • Self-employed workers pay both the employee and employer share, totaling 15.3% before any additional Medicare tax applies.
  • The Social Security wage cap means high earners pay the same dollar amount as someone earning exactly at the cap, even if they earn more.

How the Social Security wage cap affects your withholding

Social Security tax only applies to the first portion of your annual income. The IRS sets a wage base limit each year, and you stop paying Social Security tax once you reach it. In 2024, that limit is $168,600; in 2025, it is $176,100. Once your year-to-date earnings hit that number, your employer stops withholding the 6.2% Social Security tax from your remaining paychecks for that year.

This matters most if you change jobs mid-year or work multiple jobs. If you earn $100,000 at Job A and then start Job B in November, Job B's payroll system will not know you already hit the cap at Job A. You may overpay Social Security tax across both jobs. When you file your tax return, you can claim a credit for the overpayment, but you have to catch it yourself — the IRS will not automatically refund it.

Medicare tax has no wage cap. You pay 1.45% on every dollar you earn, no matter how high your income goes. The additional 0.9% Medicare tax kicks in only once you cross the income threshold for your filing status in that tax year.

What shows up on your pay stub

Your pay stub lists payroll taxes under different names depending on your employer's payroll software. Look for lines labeled FICA, Social Security, Medicare, or OASDI (Old-Age, Survivors, and Disability Insurance). The Social Security line shows 6.2% of your gross pay (or less if you have already hit the wage cap). The Medicare line shows 1.45%. If you earn over the threshold, a separate line may show the additional 0.9% Medicare tax.

Your pay stub also shows what your employer pays on your behalf, though this amount does not reduce your take-home pay. Some employers list this as "employer FICA" or "employer match." This is informational only — it is not money withheld from you, but it is part of your total compensation cost to the company.

The gross pay amount at the top of your stub is what the tax percentages are calculated from. Deductions like health insurance premiums or 401(k) contributions may reduce your taxable gross for payroll tax purposes, depending on the type of deduction. Pre-tax deductions lower the amount subject to payroll tax; post-tax deductions do not.

How to calculate your own payroll tax withholding

To estimate what you will owe, start with your annual gross income. Subtract the Social Security wage cap if your income exceeds it. Multiply the result up to the cap by 6.2%. Then multiply your total annual income by 1.45% for Medicare. If you earn over the threshold for your filing status, multiply the excess by an additional 0.9%.

Here is a concrete example: You are single and earn $220,000 in 2025. Social Security tax applies to $176,100 (the 2025 cap), so you pay $176,100 × 0.062 = $10,918.20. Medicare tax applies to all $220,000, so you pay $220,000 × 0.0145 = $3,190. The additional Medicare tax applies to $20,000 (the amount over $200,000), so you pay $20,000 × 0.009 = $180. Your total payroll tax is $14,288.20 for the year.

Divide that by the number of pay periods you receive in a year to see roughly how much comes out per paycheck. If you are paid biweekly (26 times per year), that is $14,288.20 ÷ 26 = $549.55 per paycheck. Your actual withholding may vary slightly if your income is uneven across the year or if you have pre-tax deductions.

Payroll tax for self-employed workers

If you are self-employed, you pay both the employee and employer portions of Social Security and Medicare tax. This is called self-employment tax, and it totals 15.3% (12.4% for Social Security up to the wage cap, plus 2.9% for Medicare, plus 0.9% additional Medicare if you exceed the income threshold).

You calculate self-employment tax on your net profit from your business, not your gross revenue. You report this on Schedule SE when you file your tax return. You can deduct half of your self-employment tax as a business expense, which reduces your adjusted gross income.

Self-employed workers also make quarterly estimated tax payments to the IRS, which include both income tax and self-employment tax. The IRS provides Form 1040-ES to help you calculate these payments. If you do not pay enough throughout the year, you may owe a penalty when you file your return.

State and local payroll taxes

Federal payroll tax (Social Security and Medicare) is the same everywhere in the United States. However, some states and cities also withhold income tax from your paycheck, and a few states have their own payroll taxes on top of federal FICA.

State income tax rates vary widely — some states have no income tax at all, while others withhold up to 13% or more. Local taxes in cities like New York, Philadelphia, and Columbus add another 1% to 3.8% depending on where you live and work. These are separate from federal payroll tax and appear on different lines of your pay stub.

If you move to a new state or city during the year, your payroll withholding may change. Tell your employer's payroll department about the move so they can update your W-4 or state equivalent. If you work in one state but live in another, you may owe tax to both — check your state's rules on nonresident income.

What happens if too much or too little is withheld

If your employer withholds more payroll tax than you actually owe, you will get a refund when you file your tax return. This happens most often if you had a job for only part of the year, or if you overpaid Social Security tax by working multiple jobs. The IRS does not pay interest on refunds of overpaid payroll tax.

If too little is withheld, you will owe money when you file. This can happen if you have a second job, if you are married and both spouses work, or if you have income from self-employment or investments that is not subject to withholding. You can adjust your withholding by filing a new W-4 with your employer at any time during the year.

Underpayment of payroll tax can also result in a penalty if you owe more than $1,000 when you file. The penalty is calculated based on how much you should have paid each quarter and how much you actually did pay. Filing your return on time and paying what you owe in full can reduce or eliminate the penalty.

Frequently Asked Questions

Why do I pay payroll tax if I will get Social Security benefits later?

Social Security tax funds current retirees and disabled workers, not a personal savings account. Your benefits are based on your earnings history and the age you claim, not on how much you paid in. Medicare tax similarly funds the program for all beneficiaries. You pay now so the system can pay current recipients.

Can I opt out of paying payroll tax?

No. Payroll tax is mandatory for all employees and self-employed workers. The only exception is certain members of religious groups that have been granted a waiver by the IRS, and even then the rules are very strict. If you are an employee, your employer must withhold it.

What if I work for a nonprofit or government employer?

Most nonprofit employees pay the same payroll tax as private-sector workers. Some government employees, particularly those hired before certain dates, may be covered by a different retirement system and not pay Social Security tax. Check with your employer's payroll office to confirm what you pay.

Do I pay payroll tax on bonuses and commissions?

Yes. Payroll tax applies to all compensation you receive for work, including bonuses, commissions, overtime pay, and paid time off. The same withholding rates explore — 6.2% Social Security (up to the cap) and 1.45% Medicare, plus any additional Medicare tax if you exceed the income threshold.

Why is my payroll tax different from my coworker's if we earn the same?

The most common reason is that you or your coworker has already hit the Social Security wage cap earlier in the year, so one of you stops paying that portion. Pre-tax deductions like health insurance or 401(k) contributions also reduce the amount subject to payroll tax. If you live in different states or cities, state and local taxes will differ as well.