Understanding Payroll Taxes in 2026
Payroll taxes are mandatory taxes paid by both employers and employees that fund Social Security, Medicare, and unemployment insurance. The combined employer-employee payroll tax rate is 15.3% (7.65% each) for wages up to the Social Security wage base. These taxes are separate from federal and state income taxes and are the largest tax many workers pay.
2026 Payroll Tax Rates and Limits
| Tax | Employee Rate | Employer Rate | Wage Base / Cap |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | $176,100 |
| Medicare (HI) | 1.45% | 1.45% | No cap |
| Additional Medicare | 0.9% | None | Over $200,000 (single) |
| FUTA (Unemployment) | None | 6.0% (0.6% effective) | First $7,000 |
| Total FICA | 7.65% | 7.65% | Varies |
- 1Employee Social Security: $70,000 x 6.2% = $4,340
- 2Employee Medicare: $70,000 x 1.45% = $1,015
- 3Total employee FICA: $4,340 + $1,015 = $5,355
- 4FICA per biweekly paycheck: $5,355 / 26 = $205.96
- 5Employer FICA (same): $5,355
- 6Employer FUTA: $7,000 x 0.6% = $42
- 7Total payroll tax (both sides): $5,355 + $5,355 + $42 = $10,752
Social Security Wage Base Limits
| Year | Wage Base | Max Employee SS Tax |
|---|---|---|
| 2023 | $160,200 | $9,932 |
| 2024 | $168,600 | $10,453 |
| 2025 | $176,100 | $10,918 |
| 2026 | $176,100* | $10,918* |
Once your earnings exceed the Social Security wage base ($176,100 in 2026), you stop paying the 6.2% Social Security tax on additional earnings. However, there is no cap on Medicare tax (1.45%), and high earners pay an additional 0.9% Medicare surtax on wages over $200,000 (single) or $250,000 (married filing jointly).
The employer's payroll tax adds approximately 7.65-8.25% to the cost of every employee (FICA + FUTA + state unemployment). On a $70,000 salary, the employer pays an additional ~$5,400 in payroll taxes, making the true cost approximately $75,400 before benefits.
Payroll Tax vs. Income Tax
Payroll taxes and income taxes are separate obligations. Payroll taxes (FICA) are flat-rate taxes with a cap on Social Security and fund specific programs. Income taxes are progressive (higher rates on higher income) and fund general government operations. For low and middle-income workers, payroll taxes often exceed income taxes. A worker earning $50,000 pays $3,825 in FICA but may only owe $3,306 in federal income tax.
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