How to Calculate Payroll Taxes: Employer’s Guide
Payroll taxes are employment taxes that employers must calculate, withhold, and remit to the IRS on every paycheck. They include Social Security tax (6.2% each for employer and employee), Medicare tax (1.45% each), and federal unemployment tax (FUTA). For 2026, the Social Security wage base is $184,500, meaning only the first $184,500 of each employee’s wages is subject to Social Security tax.
Quick Answer
- *According to the IRS (Topic 751), the combined FICA rate is 15.3% (7.65% employer + 7.65% employee) on wages up to $184,500 in 2026.
- *The 2026 Social Security wage base increased to $184,500, up from $176,100 in 2025 — an increase of $8,400 per Paycom.
- *According to the IRS, penalties for failing to deposit payroll taxes range from 2% to 15% of the unpaid amount depending on lateness.
- *The Additional Medicare Tax of 0.9% applies to employee wages over $200,000 — employers must withhold but do not match.
What Are Payroll Taxes?
Payroll taxes are distinct from income taxes. While income taxes are based on total earnings and deductions (and vary by filing status), payroll taxes are flat-rate taxes on wages that fund Social Security and Medicare. Every employer in the United States must calculate and remit these taxes for each employee on every pay period.
2026 Payroll Tax Rates at a Glance
| Tax | Employee Rate | Employer Rate | Wage Base |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | $184,500 |
| Medicare | 1.45% | 1.45% | No limit |
| Additional Medicare | 0.9% | N/A | Wages over $200K |
| FUTA | N/A | 6.0% (0.6% effective) | $7,000 |
| Total FICA | 7.65% | 7.65% | — |
Step-by-Step: How to Calculate Payroll Taxes
Let’s calculate payroll taxes for an employee earning $75,000 per year, paid bi-weekly (26 pay periods). Gross pay per period: $2,884.62.
Step 1: Calculate Social Security Tax
Social Security rate: 6.2% each for employer and employee
$2,884.62 × 0.062 = $178.85 per paycheck (employee share)
Employer matches: $178.85
Annual total: $178.85 × 26 × 2 = $9,300
Step 2: Calculate Medicare Tax
Medicare rate: 1.45% each
$2,884.62 × 0.0145 = $41.83 per paycheck (employee share)
Employer matches: $41.83
Annual total: $41.83 × 26 × 2 = $2,175
Step 3: Calculate FUTA (Employer Only)
FUTA applies only to the first $7,000 of wages per employee per year. The statutory rate is 6.0%, but most employers qualify for a 5.4% credit from paying state unemployment taxes, reducing the effective rate to 0.6%.
$7,000 × 0.006 = $42 per employee per year
Step 4: Total Employer Payroll Tax Cost
| Tax | Annual Cost (Employer) |
|---|---|
| Social Security (6.2%) | $4,650 |
| Medicare (1.45%) | $1,087.50 |
| FUTA (0.6%) | $42 |
| Total employer cost | $5,779.50 |
| As % of salary | 7.71% |
For a $75,000 employee, the employer pays an additional $5,779.50 in payroll taxes— roughly 7.7% on top of the salary. This is a real cost that employers must budget for when determining compensation.
What Happens When Employees Earn Over $184,500?
Once an employee’s cumulative wages reach the Social Security wage base ($184,500 in 2026), you stop withholding and matching Social Security tax. Medicare tax continues with no cap.
For a $200,000 earner:
- Social Security: $184,500 × 6.2% = $11,439 (employer + employee each)
- Medicare: $200,000 × 1.45% = $2,900 (each)
- Additional Medicare: $0 (threshold not met for single filer)
The Additional Medicare Tax Explained
Employees earning over $200,000 owe an extra 0.9% Medicare tax on wages above that threshold. This is an employee-only tax— employers do not match it. However, employers must begin withholding the additional 0.9% once wages exceed $200,000, regardless of the employee’s filing status.
For an employee earning $250,000:
Additional Medicare Tax = ($250,000 - $200,000) × 0.009 = $450
Payroll Tax Deposit Schedules and Deadlines
| Deposit Schedule | Qualification | Deadline |
|---|---|---|
| Monthly | $50,000 or less in payroll taxes (lookback period) | 15th of following month |
| Semi-weekly | Over $50,000 in payroll taxes | 1–3 business days after payday |
| Next-day | $100,000+ accumulated on any day | Next business day |
According to the IRS, all payroll tax deposits must be made electronically through the Electronic Federal Tax Payment System (EFTPS). Penalties for late deposits range from 2% (1–5 days late) to 15% (more than 10 days late after IRS notice).
Common Payroll Tax Mistakes Employers Make
- Misclassifying employees as contractors: The IRS estimates that employers misclassify millions of workers, avoiding payroll taxes. Penalties include paying all back taxes plus interest and penalties.
- Missing the wage base cutoff: Failing to stop Social Security withholding at $184,500 means over-collecting from employees.
- Late deposits: Even one day late triggers a 2% penalty. Set up automated deposits through payroll software.
- Forgetting FUTA: Although the $42/employee annual cost seems small, it adds up — and the penalties for not filing Form 940 can be significant.
For more on how payroll taxes affect take-home pay, see our take-home pay vs gross pay guide.
See exactly what comes out of each paycheck
Use our free Take Home Pay Calculator →Also useful: Paycheck Calculator · Self-Employment Tax Guide
Frequently Asked Questions
What payroll taxes do employers pay in 2026?
Employers pay 6.2% Social Security tax (on wages up to $184,500), 1.45% Medicare tax (no cap), and 6.0% FUTA tax (on the first $7,000 per employee, reduced to 0.6% with state credit). The total employer FICA burden is 7.65% of wages, matching the employee’s contribution dollar for dollar.
What is the Social Security wage base for 2026?
The Social Security wage base for 2026 is $184,500, up from $176,100 in 2025. Only the first $184,500 of each employee’s wages is subject to the 6.2% Social Security tax. Wages above this threshold are still subject to Medicare tax.
How often must employers deposit payroll taxes?
Deposit frequency depends on your tax liability. Monthly depositors ($50,000 or less in the lookback period) deposit by the 15th of the following month. Semi-weekly depositors (over $50,000) deposit within 1–3 business days of payday. All deposits are made via EFTPS.
What is the Additional Medicare Tax?
The Additional Medicare Tax is a 0.9% surtax on employee wages exceeding $200,000 per year. This is an employee-only tax — employers do not match it. However, employers must withhold it once wages pass $200,000, regardless of filing status.