Wage Base Limits of FICA Tax
The wage base limits of FICA tax refer to the maximum amount of earnings subject to Social Security tax. These limits determine the maximum amount of wages on which employees and employers must pay Social Security tax. Here are the wage base limits for FICA tax,
1. Social Security Tax
- For 2022, the wage base limit for Social Security tax is $147,000. This means that the first $147,000 of an employee’s wages are subject to Social Security tax. Any earnings above this threshold are not subject to Social Security tax.
- Employers also contribute Social Security tax on wages up to the same income threshold of $147,000.
2. Medicare Tax
- There is no wage base limit for Medicare tax. All wages earned by an employee are subject to Medicare tax at a rate of 1.45%, with an additional 0.9% for individuals with higher incomes.
What is FICA Tax & How it Works : Rates & Exemptions
FICA stands for Federal Insurance Contributions Act, which is a U.S. federal payroll tax that funds Social Security and Medicare programs. FICA taxes are withheld from employees’ paychecks and are also contributed by employers. The tax consists of two components, Social Security Tax and Medicare Tax. Social Security gives money to retired people, disabled individuals, and some widows and widowers. Medicare is a program that helps older people and some disabled people pay for their medical needs.
Geeky Takeaways:
- The FICA tax, integral to the U.S. tax system, ensures funding for Social Security and Medicare programs.
- Social Security benefits include retirement income, support for the disabled, and assistance to surviving spouses and children of deceased workers.
- Medicare provides health insurance to people aged 65 and older and some younger individuals with disabilities.
Table of Content
- How do FICA Taxes Work?
- Who Pay FICA Tax and Why?
- How are FICA Taxes Calculated?
- Wage Base Limits of FICA Tax
- FICA Tax Exemptions
- Do Non-US Citizens have to pay FICA Taxes?
- Conclusion
- FICA Tax – FAQs