Calculation of FICA Withholding - Worked Example
Author: Ryan F. Donovan
Updating Author: Alice Gilman
Unless specifically exempt, employees and employers are subject to Social Security and Medicare (FICA) taxes on any taxable wages. The 2017 Social Security tax rate is 6.2% up to the first $127,200 in taxable wages. The 2017 Medicare tax rate is 1.45% and there is no taxable wage limit. An additional 0.9% in Medicare taxes applies to wages in excess of $200,000; there is no employer match.
John works for Acme Widget Corporation and is paid biweekly. For the most recently completed pay period, he earned $800 in gross pay and he has been paid $30,000 year-to-date. John has no deductions or other items increasing or decreasing his FICA taxable income.
To calculate FICA withholding, Acme should proceed as follows:
- Calculate the Social Security taxable income. Acme must first calculate the amount of John's pay subject to Social Security tax. John's gross year-to-date pay prior to this pay period was $30,000, so the payment of an additional $800 brings his Social Security taxable income to $30,800 ($30,000 + $800 = $30,800). Since this new taxable year-to-date amount does not meet or exceed the 2017 Social Security taxable wage limit of $127,200, the entire $800 check is Social Security taxable.
- Calculate the Medicare taxable income. Since there is no limit on Medicare withholding, and John's pay is not subject to any pretax deductions, the amount of his pay subject to Medicare tax is also $800.
- Calculate the Social Security tax. Acme multiplies the 2017 employee Social Security tax rate of 6.2% by the taxable income amount of $800. The Social Security tax to withhold is $49.60 ($800 × 0.062 = $49.60).
- Calculate the Medicare tax. The Medicare tax on John's $800 paycheck is $11.60 ($800 × 0.0145 = $11.60).
- Add the Social Security and Medicare tax together. The total FICA tax amount Acme must withhold from John's $800 paycheck is $61.20 ($49.60 + $11.60 = $61.20).
The Social Security and Medicare taxable income amount will always be the same unless some or all of the paycheck is exempt from Social Security tax withholding because the employee's pay to date has reached or exceeded the Social Security taxable limit.