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FICA Tax

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FICA Tax


FICA stands for Federal Insurance Contribution Act. FICA imposes an employment tax that is paid equally by the employee and the employer. All employers are required by federal law to withhold FICA taxes from employee earnings and forward the monies to the govt. FICA taxes fund Social Security and Medicare benefits. The amount of the tax is a percentage of compensation.

In 2013, the federal government added two new Medicare taxes that are paid by the individual tax filer (Medicare Additional Tax and Net Investment Income Tax). Use our calculator at the bottom of the page to calculate your Medicare tax bill.
Compensation subject to FICA taxes includes but is not limited:
  1. Wages (salaried and hourly)
  2. Overtime
  3. Bonus
  4. Commission
  5. Paid Time Off (Vacation, Sick Leave, Bereavement)
FICA TAX

Employee Pays

Employer Pays

Social Security

6.2%

6.2%

Medicare

1.45%

1.45%

NOTES: (1) Self-employed individuals pay both the “employee” and “employer” share of Social Security and Medicare taxes; (2) There is a wage limit for Social Security taxes (wages above a pre-stated amount are not subject to the tax); (3) there is no wage limit for the Medicare tax (all wages earned are subject to the 2.9% Medicare tax)

Medicare Additional Tax

Employee
Employer
Self-employed

.9%

0%

.9%

Applies to wages above the below amounts

Married Filing
Single
Married Filing
Jointly
Single

$125,000

$250,000

$200,000

Net Investment Income Tax (NIIT)


The Net Investment Income Tax (NIIT) is a new Medicare tax on investment income. The tax is effective for the 2013 tax year.

  • The tax rate is 3.8%
  • The tax is not a payroll tax like the FICA tax
  • The tax is paid 100% by the employee or self-employed individual (it is not an employer tax)*
  • The tax is the lesser of net investment income or the amount above the modified adjusted gross income amount times the tax rate of 3.8%
  • Modified Adjusted Gross Income (MAGI) is $125,000 (Married filing single) ; $250,000 (Married filing jointly); or $200,000 (Single)

  • *If you anticipate owing the NIIT tax, you can include an additional dollar amount to be withheld from your wages on the Form W-4 (line 6).

    Example: 2013 NIIT for Sue Parks: Sue is single with a MAGI of $250,000 for the calendar year 2013. Sue had $40,000 in investment income in 2013. Sue must pay a 3.8% NIIT tax on the lesser of $50,000 ($250,000 in MAGI - $200,000 threshold for single filers) OR $40,000 (investment income amount) = (3.8% x $40,000) or $1,520.

    Medicare Tax Calculator

    Know What You May Owe in 3 Easy Steps!

    Married filing as Single Married filing Jointly Single





    This tool is not intended to provide tax or legal advice. You should consult with a tax or legal professional for specific advice on all tax and legal matters.

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