The federal payroll tax rate in 2024

Federal payroll taxes take 15.3% of your wages combined, though you and your employer each pay half. If you are an employee, you see 7.65% withheld from your paycheck. Your employer pays the other 7.65% on your behalf — money that does not appear on your stub but counts as a real cost to them.

This 15.3% breaks into two parts: 12.4% for Social Security and 2.9% for Medicare. The Social Security portion stops once you hit the wage cap, which is $168,600 in 2024. Medicare continues on all wages with no cap, though an extra 0.9% Medicare tax applies to high earners.

Self-employed people pay the full 15.3% themselves because they are both employee and employer. You report this on Schedule SE when you file taxes.

Key Takeaways

  • Employees pay 7.65% in federal payroll taxes; employers pay another 7.65% on the same wages.
  • Social Security tax is 12.4% of wages up to $168,600 per year in 2024, then stops.
  • Medicare tax is 2.9% of all wages with no upper limit, plus an extra 0.9% for high earners.
  • Self-employed workers pay the full 15.3% themselves, reported on Schedule SE with your tax return.
  • The wage cap for Social Security changes each year based on average wage growth.

How the Social Security portion works

The 12.4% Social Security tax funds the program that pays retirement, disability, and survivor benefits. You pay this tax only on wages up to an annual cap. In 2024 that cap is $168,600, meaning once you earn that much in a calendar year, no more Social Security tax comes out of your paychecks for the rest of the year.

The cap rises each year. The Social Security Administration announces the new cap in October for the following year, based on how average wages grew. If you change jobs mid-year, each employer withholds Social Security tax independently up to the cap. If you end up paying more than the annual maximum across multiple jobs, you can claim the overpayment as a credit when you file your tax return.

Your Social Security benefit later in life is based partly on how much you paid in, so the years you work and the wages you earn directly affect your future benefit amount.

How the Medicare portion works

The 2.9% Medicare tax funds hospital insurance (Part A) and is withheld on every dollar you earn with no wage cap. Unlike Social Security, there is no upper limit — you pay this tax on your first dollar and your last dollar of income in a year.

High earners face an additional 0.9% Medicare tax on wages above $200,000 (single filers) or $250,000 (married filing jointly). This extra tax was added in 2013 and applies to both employees and self-employed people. Your employer withholds it automatically if your wages cross the threshold.

Medicare tax funds hospital stays, skilled nursing care, and hospice services. Unlike Social Security, there is no separate benefit calculation — you pay the same rate regardless of income.

What happens if you work for multiple employers

Each employer withholds payroll taxes independently based on the wages they pay you. If you earn $100,000 at one job and $100,000 at another, both employers will withhold Social Security tax on their full $100,000 — even though your total wages are $200,000 and you have exceeded the annual cap.

When you file your tax return, you report all wages from all employers. If your combined Social Security tax paid exceeds the annual maximum (which it will in this scenario), the IRS automatically credits you for the overpayment. You can claim it as a refund or explore it to other taxes owed.

Medicare tax has no cap, so there is no overpayment issue there. However, if your combined wages exceed the high-earner threshold, you may owe the extra 0.9% Medicare tax, which you report on Form 8959 when you file.

Self-employed payroll taxes

If you are self-employed, you pay both the employee and employer share of payroll taxes — 15.3% total on your net self-employment income. You calculate this on Schedule SE and report it with your Form 1040.

The Social Security portion (12.4%) still has the annual wage cap of $168,600 in 2024. The Medicare portion (2.9%) applies to all net earnings with no cap, plus the extra 0.9% if your income exceeds the high-earner threshold.

You can deduct half of your self-employment tax as an adjustment to income on your tax return, which lowers your taxable income. This partially offsets the fact that you pay both sides of the tax.

How payroll taxes appear on your pay stub

Your pay stub shows federal income tax withheld separately from payroll taxes. Look for line items labeled "Social Security" or "OASDI" (Old Age, Survivors, and Disability Insurance) and "Medicare" or "HI" (Hospital Insurance).

The stub shows only your employee share — 6.2% for Social Security and 1.45% for Medicare. Your employer's 7.65% share does not appear on your stub because your employer pays it directly to the government, not from your wages.

If you earn over $200,000 (single) or $250,000 (married filing jointly), you will also see the extra 0.9% Medicare tax withheld. Some employers begin withholding this once you cross $200,000 in their payroll system alone, even if you have other income; you sort out any overpayment when you file your return.

Changes to payroll tax rates and caps

The employee and employer payroll tax rates (7.65% each) have been stable since 1990. However, the Social Security wage cap changes annually. The cap has grown from $25,900 in 1980 to $168,600 in 2024, tracking wage growth in the economy.

Congress can change payroll tax rates or caps through legislation, but this is rare. The most recent change was the temporary 2% reduction in the employee Social Security tax from 2011 to 2012, which expired. Any future changes would require new law.

The high-earner Medicare tax (0.9%) was added by the Affordable Care Act in 2013 and has remained in place since. The income thresholds for this tax ($200,000 single, $250,000 married) do not adjust for inflation.

Frequently Asked Questions

Why do I pay Social Security tax if I might not collect it?

Social Security is a mandatory program funded by current workers' taxes, which pay current retirees and disabled people. You pay in now to support those receiving benefits today, and future workers will pay for your benefits later. The program is designed as a social insurance system, not a savings account where you only get back what you paid.

Can I opt out of payroll taxes?

No. Payroll taxes are mandatory for all employees and self-employed people earning above a certain threshold. The only exceptions are some religious groups that have received specific exemptions from the IRS, and certain government employees hired before specific dates who are covered by alternative retirement systems.

What if I paid too much Social Security tax across multiple jobs?

The IRS automatically refunds or credits the overpayment when you file your tax return. You do not need to do anything special — just report all your wages from all employers on your return. The overpayment appears as a credit that reduces your tax owed or increases your refund.

Do payroll taxes count toward my income tax?

No. Payroll taxes and federal income tax are separate. Your employer withholds both from your paycheck, but they fund different programs and are calculated differently. Social Security and Medicare taxes are fixed percentages; income tax withholding depends on your W-4 form and total income.

How much of my paycheck goes to taxes total?

That depends on your income and how you filled out your W-4. Payroll taxes are fixed at 7.65% (or 8.55% if you earn over the high-earner threshold). Federal income tax withholding varies widely — it could be 0% or 30% depending on your situation. Your pay stub shows both amounts separately.