The payroll tax rate is the percentage of your wages that goes to Social Security and Medicare
Payroll taxes are split between you and your employer. You pay 6.2 percent of your gross wages to Social Security and 1.45 percent to Medicare, for a combined employee rate of 7.65 percent. Your employer pays the same amounts on your behalf. These percentages are set by federal law and do not change based on your income level or state.
The Social Security portion only applies to wages up to a certain cap, which changes each year. For 2024, that cap is $168,600 — meaning once you earn that much in a calendar year, no more of your wages go to Social Security tax for the rest of that year. Medicare tax, however, has no cap. If you earn $200,000, you pay Medicare tax on all of it.
Self-employed people pay both the employee and employer portions themselves, totaling 15.3 percent, though they can deduct half of it on their tax return. If you work for a W-2 employer, the deduction happens automatically through payroll withholding.
Key Takeaways
- Employee payroll tax is 7.65 percent of your wages: 6.2 percent for Social Security and 1.45 percent for Medicare.
- Social Security tax stops once you reach the annual wage cap ($168,600 in 2024), but Medicare tax continues on all earnings.
- Your employer pays an equal 7.65 percent on your behalf, though you do not see this amount on your paycheck.
- Self-employed workers pay 15.3 percent total but can deduct half of it when filing taxes.
- These rates are federal and uniform across all states; they do not vary based on your income or employment type.
Why the Social Security wage cap exists and how it affects high earners
The Social Security wage cap was designed to limit how much of a high earner's income funds the Social Security system. It changes annually based on wage growth in the economy. In 2023 it was $160,200; in 2024 it is $168,600. The Social Security Administration publishes the new cap each October for the following year.
If you earn $200,000 a year, you pay Social Security tax only on the first $168,600 of that income. The remaining $31,400 is not subject to Social Security tax. This means high earners pay a smaller percentage of their total income to Social Security than lower-wage workers do. Medicare tax, by contrast, has no such cap and applies to every dollar you earn.
If you change jobs during the year, each employer withholds Social Security tax independently. If your combined wages from multiple employers exceed the cap, you may have overpaid. You can claim a refund of the excess when you file your federal tax return.
Medicare tax for high earners: the additional 0.9 percent
In addition to the standard 1.45 percent Medicare tax, high earners pay an additional 0.9 percent Medicare tax on wages above a threshold. For single filers, that threshold is $200,000. For married couples filing jointly, it is $250,000. For married filing separately, it is $125,000.
This additional tax was introduced in 2013 as part of the Affordable Care Act. Unlike the standard Medicare tax, there is no employer match — you pay the full 0.9 percent yourself. Your employer is responsible for withholding it, but they do not contribute their own portion.
If you have multiple jobs or your spouse also works, your combined household income may trigger this tax even if neither of you individually crosses the threshold. When you file your tax return, you can reconcile whether the correct amount was withheld across all your employers.
How payroll tax withholding appears on your paycheck
Your paycheck stub lists payroll taxes under separate line items. You will see "Social Security" or "OASDI" (Old-Age, Survivors, and Disability Insurance) showing 6.2 percent of your gross pay. Below that is "Medicare" showing 1.45 percent. If you earn above the high-earner threshold, a line for "Additional Medicare Tax" or "Medicare 0.9%" will also appear.
These amounts are withheld before you receive your paycheck. They are not optional and do not depend on how you fill out your W-4 form. The W-4 controls federal income tax withholding, not payroll taxes. Payroll tax withholding is automatic and the same for all employees at the same wage level.
Your employer also pays matching amounts, but these do not appear on your paycheck because they are paid directly to the government. You can see the employer portion listed on your W-2 form at the end of the year under "Social Security wages" and "Medicare wages and tips."
State payroll taxes and how they differ from federal rates
Federal payroll taxes (Social Security and Medicare) apply everywhere in the United States. However, some states also collect their own payroll taxes for state disability insurance, paid family leave, or unemployment insurance. These are separate from federal payroll tax and vary by state.
California, New Jersey, New York, and Rhode Island have state disability insurance programs that deduct an additional percentage from your paycheck. California and New Jersey also have paid family leave taxes. These rates change annually and are set by each state. For example, California's state disability insurance rate for 2024 is 1.0 percent of wages up to a state cap.
If you work in a state with these programs, your paycheck will show additional line items beyond the federal 7.65 percent. Your employer may also contribute to these programs, though the employee portion is what appears on your stub. Check your state's labor department website to see what payroll taxes apply where you work.
What happens to the money you pay in payroll taxes
The 6.2 percent you pay to Social Security funds the Social Security trust fund, which pays retirement benefits, survivor benefits, and disability benefits. The 1.45 percent you pay to Medicare funds the Medicare trust fund, which pays for hospital insurance (Part A) and other Medicare services. These are not savings accounts in your name — they are insurance programs that pool money from all workers.
Your future Social Security benefit is based on your earnings record and the age at which you claim, not on how much you paid in. Similarly, your Medicare coverage at age 65 is based on your work history, not on your contributions. Both programs are designed so that current workers fund current beneficiaries.
You can view your earnings record and estimated benefits by creating an account on ssa.gov. This shows how much you have paid into Social Security over your lifetime and what your benefit might be at different claiming ages.
Frequently Asked Questions
Do I pay payroll taxes on tips or bonuses?
Yes. Social Security and Medicare taxes apply to all wages, including tips, bonuses, and commissions. Your employer withholds payroll taxes on these amounts just as they do on your regular salary. Tips must be reported to your employer, and they are subject to payroll tax withholding.
What if my employer does not withhold payroll taxes?
Report it to the Department of Labor or your state labor board immediately. Employers are required by law to withhold and remit payroll taxes. If your employer fails to do so, you may still owe the taxes yourself when you file your return, and you should seek legal advice about recovering unpaid wages.
Can I opt out of paying payroll taxes?
No. Payroll taxes are mandatory for all employees and self-employed people with net earnings above $400 per year. The only exceptions are certain religious groups and some government employees with their own pension systems, and these require specific IRS approval.
Why do I pay payroll taxes if I am already paying federal income tax?
Payroll taxes and federal income tax are two separate systems. Payroll taxes fund Social Security and Medicare specifically. Federal income tax funds general government operations. Both are withheld from your paycheck, and both are required.
Does the payroll tax rate change if I get a raise?
No. The rate stays at 6.2 percent for Social Security and 1.45 percent for Medicare regardless of your salary. However, if a raise pushes you over the Social Security wage cap or the high-earner Medicare threshold, the amount you pay may change because it applies to a different portion of your income.