Employers subtract a set sum from the employee’s salary to cover the federal income tax, social security tax, medicare tax, and state tax. The combination of social security tax and medicare tax is referred to as the Federal Insurance Contributions Act (FICA).
In this blog we will be understanding the FICA rate 2024 and limits which will help you with federal payroll taxes.
What are FICA Taxes?
The Federal Insurance Contributions Act (FICA) serves as a guiding legislation for the deduction of taxes from an employee’s salary, while also ensuring that the employer matches this deduction with an equal contribution towards the Social Security and Medicare Program.
The FICA tax deduction offers advantages to eligible senior American citizens, retired individuals, widows, widowers, and disabled workers who qualify for benefits.
What is the Social Security Program?
The Social Security Program aims to provide financial protection for individuals who have lost their income as a result of retirement or for the surviving family members of deceased workers. Monthly benefits are distributed to eligible recipients from the Social Security Fund.
The funds for this program are raised primarily via the payroll taxes paid by the employer for their employees and self-employed individuals.
What is the Medicare Program?
The Medicare Program provides health coverage for senior citizens who are aged above 65+. The program is funded by the payroll taxes which are paid by the employees with matching contributions from their employer, and also self-employed individuals.
Additional Medicare Taxes
The additional Medicare tax rate is 0.9%. Below mentioned is a table of limit based on the filing status:
| Filing Status | Threshold Limit |
| Married filing jointly | $250,000 |
| Married filing separately | $125,000 |
| Single | $200,000 |
| Head of Household | $200,000 |
| Qualifying widower with dependent child | $200,000 |
FICA Tax Rate 2024
FICA tax is a combination of social security tax and medicare tax. The taxes imposed on social security tax will be 6.2% and 1.45% for medicare tax for every employee with the exact matching contribution from their employer.
| FICA Tax Rate | Employee Contribution | Employer Contribution | Total |
| Social Security Tax | 6.2% | 6.2% | 12.4% |
| Medicare Tax | 1.45% | 1.45%` | 2.9% |
| Additional Medicare | 0.9% | 0.9% | |
| Social Security + Medicare + Additional Medicare | 8.55% | 7.65% | 16.2% |
Self-Employment Contributions Act (SECA) taxes for self-employed
The wage base limit procedure varies slightly for self-employed individuals, as they assume the roles of both employers and employees. These individuals contribute a total of 15.3% towards social security taxes on their net earnings, up to a maximum of $162,000.
Other Withholding Taxes in Payroll
Payroll taxes have other tax components which are described below:
- Federal Income Tax: The tax withheld from the employee paycheck towards the federal income tax based upon the Publication 15. The amount withheld will be based on the information the employee provided on their federal Form W-4.
- State Income Tax: The tax withheld from the employee paycheck towards the state income tax. The amount withheld will be based on the information the employee provided on their state Form W-4.
- Local Income Tax: The tax withheld from the employee paycheck towards the local income tax. The amount withheld shall be based on the information the employee provided on their state’s Form W-4.
- FUTA Tax: The Federal Unemployment Tax Act (FUTA) is used to fund the federal unemployment program that benefits people who lose their jobs. No taxes are withheld from the employee paycheck towards the FUTA tax.
- SUTA Tax: The State Unemployment Tax Act (SUTA) is similar to FUTA tax, so as to fund the state unemployment programs which benefit people who lose their jobs.
Conclusion
To effectively handle payroll operations, it is essential to have a thorough understanding of the 2024 fica tax rates and limits. By grasping the complexities of this rate, employers can precisely calculate payroll taxes, ensure adherence to legal obligations, and efficiently allocate funds for labor expenses.
Additionally, remaining informed about any adjustments or amendments to the FICA rate helps businesses modify their payroll procedures accordingly, decreasing the chances of errors and penalties. Ultimately, a deep understanding of the FICA rate enables organizations to streamline their payroll management, uphold financial stability, and promote a positive work environment for their employees.
