Payroll Tax
Definition
Taxes withheld from employee wages and paid by both employers and employees to fund Social Security and Medicare (collectively known as FICA). Employees pay 6.2% for Social Security (on wages up to $176,100 in 2025) and 1.45% for Medicare (no wage cap), for a combined 7.65%. Employers match these amounts. An additional 0.9% Medicare surtax applies to wages over $200,000 for single filers. Payroll taxes are separate from income tax.
Example
On a $60,000 salary, you pay $3,720 in Social Security tax and $870 in Medicare tax, totaling $4,590. Your employer pays the same amount, bringing the total payroll tax to $9,180.
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