02/17/2026
🇺🇸 Payroll Taxes (2026 Structure Overview)
Payroll taxes fund Social Security, Medicare, and unemployment insurance. They are separate from federal income tax.
1️⃣ Social Security Tax
Rate: 12.4% total
6.2% paid by employee
6.2% paid by employer
Wage Base Limit: Applies only up to an annual income cap (adjusted yearly).
Example:
If wage base = $168,600
Maximum Social Security tax per employee:
6.2% × $168,600 = $10,453.20 (employee portion)
High earners stop paying Social Security tax once they exceed the wage cap.
2️⃣ Medicare Tax
Rate: 2.9% total
1.45% employee
1.45% employer
No income limit.
Applies to all wages.
3️⃣ Additional Medicare Tax
Rate: 0.9% (employee only)
Applies when income exceeds:
$200,000 (Single)
$250,000 (Married filing jointly)
Employer does not match this extra 0.9%.
4️⃣ Self-Employment Tax
For freelancers, contractors, and business owners.
Total Rate: 15.3%
12.4% Social Security
2.9% Medicare
Since self-employed individuals pay both “employee + employer” portions, they cover the full amount.
However:
Social Security portion still has wage cap
Half of self-employment tax is deductible
5️⃣ Federal Unemployment Tax (FUTA)
Rate: 6.0% on first $7,000 of wages per employee
BUT most employers receive a 5.4% credit.
Effective rate for most employers: 0.6%
Maximum FUTA per employee: 0.6% × $7,000 = $42 annually
Employees do not pay FUTA.
Quick Summary Table
Tax Type
Employee Pays
Employer Pays
Income Cap?
Social Security
6.2%
6.2%
Yes
Medicare
1.45%
1.45%
No
Additional Medicare
0.9%
—
No
Self-Employment
15.3% total
—
SS capped
FUTA
—
0.6% (usually)
$7,000
Key Insight
Payroll taxes:
Are flat (not progressive like income tax)
Fund retirement & healthcare systems
Hit wage earners directly
Stop at cap for Social Security, but not for Medicare
Financial Accounting
