The payroll tax rate is 15.3 percent of your wages, split between you and your employer

Payroll tax has two parts: Social Security and Medicare. You pay 6.2 percent toward Social Security and 1.45 percent toward Medicare, totaling 7.65 percent. Your employer pays the same amount on your behalf. The 15.3 percent figure is the combined rate, but you only see half of it on your paycheck.

The amount you pay depends on how much you earn. Social Security tax stops once you reach a certain income threshold each year — in 2024, that threshold is $168,600. Medicare tax has no income limit, so you pay 1.45 percent on every dollar you earn, no matter how high your income goes. If you earn more than $200,000 as a single filer (or $250,000 married filing jointly), you pay an additional 0.9 percent Medicare tax on the excess.

Self-employed people pay both the employee and employer portions themselves, which comes to 15.3 percent of net business income. You can deduct half of this amount when you file taxes, but you still owe the full amount upfront.

Key Takeaways

  • You pay 7.65 percent of your wages in payroll tax; your employer pays another 7.65 percent on your behalf.
  • Social Security tax stops at $168,600 of annual income in 2024, but Medicare tax continues on all earnings.
  • High earners pay an extra 0.9 percent Medicare tax on income above $200,000 (single) or $250,000 (married filing jointly).
  • Self-employed workers pay the full 15.3 percent themselves but can deduct half when filing taxes.
  • The exact dollar amount you pay depends on your gross wages and whether you cross the income thresholds.

How the Social Security portion works

Social Security tax is 6.2 percent of your gross wages up to the annual wage base. The wage base changes each year based on inflation. For 2024, you stop paying Social Security tax once your earnings reach $168,600. If you earn $168,600 or more, you pay 6.2 percent on the first $168,600 only, not on anything above that.

This means a person earning $50,000 pays $3,100 in Social Security tax. A person earning $200,000 pays $10,453.20 (6.2 percent of $168,600), not 6.2 percent of the full $200,000. The wage base is indexed to national wage growth, so it will be higher in 2025.

How the Medicare portion works

Medicare tax is 1.45 percent of your gross wages with no upper limit. You pay it on every dollar you earn, whether you make $30,000 or $300,000. Unlike Social Security, there is no threshold where Medicare tax stops.

If you earn more than $200,000 as a single filer or $250,000 as a married couple filing jointly, you owe an additional 0.9 percent Medicare tax on the income above those thresholds. This extra tax was added in 2013 to help fund the Affordable Care Act. So a single person earning $220,000 pays the standard 1.45 percent on all $220,000, plus an extra 0.9 percent on the $20,000 above $200,000.

What happens if you work multiple jobs

If you have more than one job, each employer withholds Social Security tax separately. This can result in overpaying Social Security tax if your combined earnings exceed the annual wage base. For example, if you earn $100,000 at one job and $80,000 at another, you will pay Social Security tax on both full amounts even though your combined income is $180,000.

You can claim a refund of the overpaid Social Security tax when you file your annual tax return. The IRS will calculate how much you overpaid and refund the difference. Medicare tax does not have this problem because there is no wage base limit — you simply pay 1.45 percent on all earnings from all jobs.

Self-employment tax rates

If you are self-employed, you pay self-employment tax instead of having an employer withhold payroll tax. Self-employment tax is 15.3 percent of your net business income — 12.4 percent for Social Security and 2.9 percent for Medicare. You calculate this on Schedule SE when you file your taxes.

The Social Security portion (12.4 percent) still stops at the annual wage base of $168,600 in 2024. The Medicare portion (2.9 percent) continues on all income, plus the extra 0.9 percent if you exceed the high-income thresholds. When you file your tax return, you can deduct half of your self-employment tax as a business expense, which reduces your taxable income.

How payroll tax appears on your pay stub

Your pay stub shows several deductions. Look for lines labeled "Social Security Tax" or "OASDI" (Old Age, Survivors, and Disability Insurance) and "Medicare Tax" or "Med Tax." These are your payroll tax withholdings. Your employer also pays matching amounts, but those do not appear on your pay stub — they are a cost to the employer.

The amount withheld depends on your gross pay for that period. If you are paid biweekly and earn $2,000 per paycheck, you will see approximately $122 withheld for Social Security (6.2 percent) and $29 for Medicare (1.45 percent), totaling $151 per paycheck. Over a year, that adds up to roughly $3,926 in Social Security tax and $946 in Medicare tax on $52,000 in annual earnings.

Income thresholds and wage bases for 2024

The Social Security wage base for 2024 is $168,600. This means you pay 6.2 percent Social Security tax on income up to $168,600 and nothing on income above that. The wage base increases each year; in 2023 it was $160,200, and in 2025 it will likely be higher.

The Medicare tax thresholds for the additional 0.9 percent tax are $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. These thresholds do not change year to year — they were set in 2013 and have remained the same since then.

Frequently Asked Questions

Why do I pay payroll tax if I am already paying income tax?

Payroll tax and income tax are separate. Payroll tax funds Social Security and Medicare specifically. Income tax funds general government operations. You pay both on the same wages, but they go to different places and fund different programs.

Can I opt out of paying payroll tax?

No. Payroll tax is mandatory for all employees and self-employed people. Some religious groups have limited exemptions from self-employment tax, but these are rare and require IRS approval. Most workers have no option to opt out.

What if my employer did not withhold payroll tax?

Contact your employer immediately and ask them to correct the withholding. If they refuse or go out of business, you may still owe the tax. Report the issue to the IRS and your state labor department. You may be able to recover unpaid wages through a wage claim.

Do I get back the payroll tax I paid?

Social Security and Medicare taxes fund benefits you may receive later — Social Security retirement or disability benefits, and Medicare coverage at age 65. You do not get a refund of the tax itself, but you receive benefits based on your earnings record. Income tax withholding can result in a refund if you overpaid.

How much payroll tax will I pay this year?

Multiply your expected annual gross income by 0.0765 (7.65 percent). If you earn over $168,600, subtract the amount above that threshold before multiplying by 0.062 for Social Security, then add 0.0145 times your full income for Medicare. If you earn over $200,000 (single) or $250,000 (married), add 0.009 times the excess income for the additional Medicare tax.