In 2018, the FICA tax rates were 7.65% for the employee and 7.65% for the employer, for a combined 15.3% of covered wages. That 7.65% was made up of 6.2% for Social Security and 1.45% for Medicare. Social Security tax applied only to the first $128,400 of wages; Medicare tax applied to every dollar. Higher earners owed an extra 0.9% Medicare surcharge above certain income thresholds, and self-employed workers paid both halves themselves.
The Employee and Employer Split
FICA funds two separate programs: Social Security (Old-Age, Survivors, and Disability Insurance) and Medicare (Hospital Insurance). Federal law sets the rates for each side of the payroll.1Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax2Office of the Law Revision Counsel. 26 USC 3111 – Rate of Tax
For 2018, the employee owed 6.2% Social Security plus 1.45% Medicare on wages. The employer owed the same amounts on those same wages. The rates themselves have not changed since 1990.3Social Security Administration. FICA and SECA Tax Rates Your employer withheld the employee share from each paycheck and sent it to the Treasury with the matching employer portion.
The 2018 Social Security Wage Base
The Social Security portion of FICA stopped once your 2018 wages reached $128,400.4Social Security Administration. Contribution and Benefit Base Above that number, neither you nor your employer owed the 6.2%. The 1.45% Medicare tax kept running on every dollar with no ceiling.5Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
An employee earning at or above the cap in 2018 paid a maximum of $7,960.80 in Social Security tax for the year. The prior year’s base was $127,200, and it rose to $132,900 in 2019.
If You Had More Than One Employer
If you worked two or more jobs in 2018 and your combined wages passed $128,400, each employer withheld Social Security tax independently on its own payroll. That could push your total withholding above the annual maximum. You could claim the excess as a credit on your federal income tax return. Employers, though, could not recover their matching portions, because each employer’s obligation was based only on the wages it paid.
The 0.9% Additional Medicare Tax
Higher-income workers owed an additional 0.9% Medicare tax on wages above statutory thresholds. The surcharge was created by the Affordable Care Act and took effect in 2013.1Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax For 2018, the thresholds by filing status were:
- Single or head of household: $200,000
- Married filing jointly: $250,000 combined
- Married filing separately: $125,000
These thresholds are set by statute and have not been adjusted since the tax was introduced.6Internal Revenue Service. Topic No. 560, Additional Medicare Tax Employers had to start withholding the extra 0.9% once an individual employee’s wages crossed $200,000 in a calendar year, regardless of filing status, and there is no employer match on this piece.
Because the withholding trigger ($200,000 for everyone) did not match the actual liability trigger (which varies by filing status), some filers owed more at tax time while others had been over-withheld and could claim a credit. Taxpayers reconciled the amount on Form 8959.7Internal Revenue Service. About Form 8959, Additional Medicare Tax
Self-Employment Tax in 2018
If you worked for yourself, you paid both halves of FICA through the self-employment tax. The combined rate was 15.3%: 12.4% for Social Security and 2.9% for Medicare.8Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax The same $128,400 wage base capped the Social Security portion, and the 0.9% Additional Medicare Tax applied at the same income thresholds shown above.
Self-employment tax was not calculated on your full net profit. You multiplied net self-employment income by 92.35% (0.9235) to reach the taxable amount. The adjustment mirrors the fact that a W-2 employee’s wages do not include the employer’s matching share of FICA.9Internal Revenue Service. Topic No. 554, Self-Employment Tax
Say you had $150,000 in net self-employment earnings for 2018. Multiply by 0.9235 and you get $138,525 in taxable self-employment income. The 12.4% Social Security portion applied only to the first $128,400 of that; the 2.9% Medicare portion applied to the full $138,525.
Self-employed filers could also deduct half of their total self-employment tax when computing adjusted gross income. The deduction went on Schedule 1 of Form 1040 and lowered income tax, though it did not reduce the self-employment tax itself.9Internal Revenue Service. Topic No. 554, Self-Employment Tax
Who Was Exempt
Most workers owed FICA in 2018, but a few categories were not covered.
- Students employed by the school where they were enrolled and pursuing a course of study were generally exempt. The test was whether education or employment was the primary purpose of the relationship.10Internal Revenue Service. Student Exception to FICA Tax
- Certain nonresident aliens on F-1, J-1, M-1, or Q-1/Q-2 visas were exempt for a limited window, generally the first five calendar years for students and the first two for non-student scholars, provided they had not become U.S. residents for tax purposes.
- Members of a recognized religious sect that has continuously existed since December 31, 1950, and that provides for its dependent members, could apply for exemption on Form 4029. Approval required waiving all rights to Social Security and Medicare benefits.11Internal Revenue Service. Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits