How to Compute FICA Taxes

by Mark Kennan

FICA, the acronym for the Federal Insurance Contributions Act, refers to the total of the payroll taxes your employer takes out of your paycheck. FICA does not include any federal or state income taxes that your employer withheld from your taxes, just the Social Security and Medicare taxes. FICA taxes only apply to your earned income, not to your unearned income. For example, you must pay FICA taxes on your salary, but not on the interest you earn on your savings account. Knowing the amount of FICA taxes that should be withheld from your paycheck helps you double check your W-2 to make sure your employer has not withheld too much.

FICA Taxes

Compare the annual Social Security wage base to your wage income for the year and select the smaller number to find your total income subject to the Social Security portion of FICA taxes. For the 2011 tax year, the limit is $106,800. In 2012, the limit increases to $110,100. For example, if your wage income in 2012 is $160,000, only $110,100 would be subject to the Social Security tax.

Multiply the amount of wages subject to the Social Security tax by the employee's portion of the Social Security tax. In 2011 and 2012, the Social Security tax rate has been lowered to 4.2 percent, but unless the rate change is extended, the rate will return to 6.2 percent in 2013. Continuing the example, if you have $110,100 in wages subject to the Social Security tax in 2012, multiply $110,100 by 0.042 to find you should have $4,624.20 taken out of your paycheck.

Multiply all of your earned income by the Medicare tax rate. Unlike the Social Security part of the FICA tax, the Medicare tax is not limited to a certain amount of income. As of 2012, the Medicare tax rate for employees is 1.45 percent. Continuing the example, if you have $160,000 in wage income in 2012, multiply $160,000 by 0.0145 to find you should have $2,320 taken out of your paycheck.

Add the Social Security tax to the Medicare tax to find the total FICA taxes to be withheld from your paycheck. Finishing this example, add $4,624.20 to $2,320 to find you should have a total of $6,944.20 withheld from your paycheck for FICA taxes.

Tip

  • If you have less income than the Social Security wage base, you can simply add the Medicare rate to the Social Security rate and multiply the result by your wages. For example, if you have $40,000 of wage income in 2012, the Social Security rate plus the Medicare rate equals 5.65 percent and 0.0565 times $40,000 equals $2,260 to be withheld from your paycheck for FICA taxes.

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