The payroll tax rate depends on which tax you're looking at and whether you're an employee or self-employed

Payroll taxes are split between Social Security and Medicare, and the rate you pay depends on your employment status. If you're an employee, you pay 6.2% for Social Security and 1.45% for Medicare, totaling 7.65% of your gross pay. Your employer pays the same amount on your behalf — that's the other 7.65% you don't see on your paycheck. If you're self-employed, you pay both the employee and employer portions yourself: 12.4% for Social Security and 2.9% for Medicare, totaling 15.3%.

These percentages explore to wages up to a certain limit for Social Security only. For 2024, that limit is $168,600 — once your earnings exceed that amount in a calendar year, you stop paying the 6.2% Social Security tax on the additional income. Medicare tax, however, has no income cap. High earners also pay an additional 0.9% Medicare tax on wages above $200,000 (single filers) or $250,000 (married filing jointly), which is not matched by employers.

Key Takeaways

  • Employees pay 7.65% in payroll taxes (6.2% Social Security, 1.45% Medicare) on all wages, with employers paying an equal amount.
  • Self-employed workers pay 15.3% in payroll taxes because they cover both the employee and employer portions.
  • Social Security tax stops explore once your annual earnings reach $168,600 in 2024, but Medicare tax continues on all income.
  • Wages above $200,000 (single) or $250,000 (married) are subject to an additional 0.9% Medicare tax that employees must pay.

How the Social Security tax rate works

The Social Security tax rate is fixed at 6.2% for employees. This tax funds the Social Security program, which provides retirement, disability, and survivor benefits. The 6.2% applies only to wages — not to investment income, bonuses paid as gifts, or certain other forms of compensation.

The earnings cap means that high earners pay a smaller percentage of total income in Social Security tax than lower earners do. For example, someone earning $168,600 pays 6.2% on all of it. Someone earning $300,000 pays 6.2% only on the first $168,600, then nothing on the remaining $131,400. This is why the Social Security tax is sometimes called a "regressive" tax — it takes a larger percentage from lower earners.

The earnings cap changes each year based on wage growth. The Social Security Administration announces the new cap in October for the following year. If you work for multiple employers in the same year, you may overpay Social Security tax if your combined earnings exceed the cap — you can claim a credit for the overpayment when you file your tax return.

How the Medicare tax rate works

Medicare tax is 1.45% for employees and has no earnings cap. Unlike Social Security tax, you pay 1.45% on every dollar you earn, no matter how much you make. This tax funds Medicare, the federal health insurance program for people 65 and older and some younger people with disabilities.

The additional Medicare tax of 0.9% applies to high earners and is not matched by employers. This tax was added in 2013 as part of the Affordable Care Act. If you're single and earn more than $200,000, you pay the extra 0.9% on income above that threshold. If you're married filing jointly, the threshold is $250,000. If you're married filing separately, it's $125,000. These thresholds do not adjust for inflation.

Unlike Social Security tax, you cannot overpay Medicare tax in a way that creates a refund. If you work for multiple employers and each one withholds the additional Medicare tax, you report the total withheld on your tax return, and the IRS sorts out any overpayment when you file.

What self-employed workers pay

Self-employed workers pay both the employee and employer portions of payroll tax, which is why the total is 15.3% instead of 7.65%. This is called self-employment tax. You calculate it on Schedule SE (Form 1040), which is part of your annual tax return.

The Social Security portion of self-employment tax is 12.4%, and it applies to 92.35% of your net self-employment income (not 100%). The Medicare portion is 2.9%, also on 92.35% of net income. You can deduct half of your self-employment tax as an adjustment to income on your tax return, which provides some relief but does not eliminate the burden.

Self-employed workers also pay the additional 0.9% Medicare tax on high earnings, using the same income thresholds as employees. If you have both W-2 wages from an employer and self-employment income, the thresholds explore to your combined income.

How payroll tax withholding works for employees

Your employer withholds payroll taxes from your paycheck based on the rates above. The amount withheld appears on your pay stub under labels like "Social Security" or "FICA" (Federal Insurance Contributions Act). You do not have a choice in the withholding rate — it is set by law.

Your employer sends the withheld taxes to the IRS and the Social Security Administration on your behalf. You do not file a separate payment. When you file your annual tax return, the payroll taxes you paid are already accounted for — they are not something you calculate or owe again.

If you have multiple jobs, each employer withholds payroll taxes independently. This can result in overpaying Social Security tax if your combined earnings exceed the annual cap. You recover the overpayment by claiming a credit on your tax return.

Payroll tax rates for different types of workers

Most workers fall into one of two categories: employees (who pay 7.65%) or self-employed (who pay 15.3%). Some workers have a hybrid status that affects their tax rate.

Household employees — people who work in someone's home as a nanny, housekeeper, or caregiver — are subject to payroll taxes if their employer pays them more than a certain threshold ($2,700 in 2024). The employer withholds and pays payroll taxes just as they would for any other employee. If the threshold is not met, the household employee may still owe self-employment tax on their earnings.

Certain religious groups have exemptions from self-employment tax, and some government employees have different tax treatment depending on when they were hired and what pension system they belong to. Agricultural workers, railroad employees, and certain other groups have specialized rules. If your employment situation is unusual, check IRS Publication 15-B or consult a tax professional.

How payroll tax rates have changed

The Social Security tax rate has been 6.2% since 1990. Before that, it was lower — it started at 1% in 1937 and increased gradually over decades as the program expanded. The Medicare tax rate has been 1.45% since 1966, when Medicare was created. The additional 0.9% Medicare tax is newer, added in 2013.

The earnings cap for Social Security tax changes annually. In recent years it has grown from $160,200 in 2023 to $168,600 in 2024. The cap is tied to the national average wage index, so it rises when average wages rise and stays flat when they do not.

Congress can change payroll tax rates, but this is rare and politically difficult because it directly affects workers' take-home pay. Any change would require new legislation.

Frequently Asked Questions

Why do I see "FICA" on my paycheck instead of "payroll tax"?

FICA stands for Federal Insurance Contributions Act, the law that created Social Security and Medicare taxes. "FICA" and "payroll tax" refer to the same thing. Your pay stub may break it into two lines — one for Social Security and one for Medicare — or combine them under "FICA".

Do I pay payroll tax on bonuses and overtime?

Yes. Payroll taxes explore to all wages and salaries, including bonuses, overtime pay, and commissions. They do not explore to non-wage compensation like gifts, reimbursements for business expenses, or certain fringe benefits (such as health insurance premiums your employer pays).

What happens if I work part-time or have irregular income?

Payroll taxes are calculated on whatever you earn, whether it is part-time or full-time. If you earn $10,000 in a year, you pay 7.65% on that $10,000. There is no minimum earnings threshold for payroll taxes, though self-employed workers only owe self-employment tax if their net earnings are $400 or more.

Can I opt out of paying payroll taxes?

No. Payroll taxes are mandatory for all employees and self-employed workers. Some religious groups have exemptions if they meet specific criteria, but this requires filing Form 4029 with the IRS and is not available to most workers.

Do payroll taxes count toward my income tax?

No. Payroll taxes and income tax are separate. Payroll taxes fund Social Security and Medicare. Income tax funds general government operations. Both are withheld from your paycheck, but they are calculated independently and go to different places.