How A lot Does an Employer Pay in Payroll Taxes?


that paying somebody comes at a value. Along with giving staff their paychecks, you even have the price of payroll taxes. So, how a lot does an employer pay in payroll taxes? Preserve studying to be taught extra concerning the employer value of payroll taxes.

How a lot do employers pay in payroll taxes?

So, how a lot does an employer pay in payroll taxes? The price of payroll taxes largely will depend on the variety of staff you’ve and the way a lot you pay your staff. Why? As a result of payroll taxes are a share of every worker’s gross taxable wages and never a set greenback quantity. 

Payroll tax contains two particular taxes: Social Safety and Medicare taxes. Each taxes fall below the Federal Insurance coverage Contributions Act (FICA), and employers and staff pay these taxes. 

Payroll tax share is 15.3% of an worker’s gross taxable wages. In whole, Social Safety is 12.4%, and Medicare is 2.9%, however the taxes are break up evenly between each worker and employer. 

So, how a lot is the employer value of payroll taxes? Employer payroll tax charges are 6.2% for Social Safety and 1.45% for Medicare. 

In case you are self-employed, you should pay the whole lot of the 15.3% FICA tax, plus the extra Medicare tax, if relevant (and we’ll get to that in a minute). 

How much employers pay in payroll taxes is 7.65% of gross taxable wages for the total FICA contribution. The Social Security portion of FICA is 6.2% of gross taxable wages. The Medicare portion of FICA is 1.45% of gross taxable wages. Self-employed? Pay the full portion of FICA tax, which is 15.3% of gross taxable wages.

Social Safety

Social Safety taxes have a wage base. In 2024, this wage base is $168,600. The wage base signifies that you cease withholding and contributing Social Safety taxes when an worker earns greater than $168,600. 

Check out an instance. Let’s say you’ve an worker who earns $2,000 biweekly:

$2,000 X 6.2% = $124

The employer value of payroll tax is $124.  

Remember the fact that some pre-tax deductions (e.g., Part 125 plans) can decrease the gross taxable wages and affect how a lot you contribute per worker paycheck. 

For instance, an worker with gross wages of $1,500 biweekly and a $500 Part 125 deduction has $1,000 in gross taxable wages ($1,500 – $500). So, you calculate Social Safety on $1,000 as a substitute of $1,500:

$1,000 X 6.2% = $62

The employer value of the Social Safety tax is $62. 

Medicare

In contrast to Social Safety, Medicare taxes don’t have a wage base. As an alternative, Medicare has an extra withholding tax for workers who earn extra $200,000.

Do employers pay the extra Medicare tax? No, employers solely pay 1.45%, even when an worker earns greater than $200,000. Further Medicare tax solely applies to staff. 

For instance, an worker earns $250,000 per yr, so the worker pays 1.45% on the $250,000 in wages, plus 0.9% on the $50,000 over $200,000. 

Calculate the Medicare tax for the whole gross wages:

$250,000 X 1.45% = $3,625

Because the employer, you solely pay $3,625 for Medicare taxes on the worker’s $250,000. 

As a result of the worker pays the extra Medicare tax, discover the full tax quantity for $50,000 ($250,000 – $200,000):

$50,000 X 0.9% = $450

Add collectively the totals for each to seek out the full the worker pays:

$3,625 + $450 = $4,075

The worker pays $450 extra in Medicare taxes than the employer on this instance. 

Like Social Safety taxes, pre-tax deductions might affect Medicare tax calculations. Subtract relevant pre-tax deductions from the full gross wages earlier than calculating the Medicare tax quantity to withhold and contribute. 

For instance, your worker earns $1,500 biweekly however has a $500 Part 125 deduction. Calculate the Medicare taxes for $1,000 in gross taxable wages ($1,500 – $500):

$1,000 X 1.45% = $14.50

Withhold and contribute $14.50 for Medicare taxes. 

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Self-employed tax

In case you are self-employed, pay the whole value of payroll taxes (aka self-employment taxes). And, pay the extra 0.9% Medicare tax, too, if you happen to earn greater than the brink per yr. 

Let’s say you earn $100,000 per yr. You’d pay the total 12.4% of Social Safety tax:

$100,000 X 12.4% = $12,400

As a result of you don’t hit the wage base for Medicare, don’t pay the extra 0.9%. Nevertheless, you should pay the total 2.9% of Medicare:

$100,000 X 2.9% = $2,900

Add collectively the quantities for each Social Safety and Medicare:

$12,400 + $2,900 = $15,300

You can too multiply your gross wage by the whole lot of the FICA tax:

$100,000 X 15.3% = $15,300

For those who earn greater than $142,800, cease calculating Social Safety tax on wages above the wage base. For those who earn greater than $200,000 (single), multiply all earnings over the bottom by 3.8% for the extra Medicare tax. 

Employer-only paid taxes

Along with the employer-employee payroll taxes you pay, there are different payroll taxes paid by employer on behalf of your staff. The 2 essential taxes are:

  1. Federal unemployment tax (FUTA)
  2. State unemployment tax (SUTA)*

*Some states (e.g., Pennsylvania) embrace state unemployment tax as an employee-paid tax, too. Examine together with your state to see in case your staff should pay into unemployment. 

Federal unemployment tax is 6.0% on the primary $7,000 in worker wages. Nevertheless, most states and companies obtain a tax credit score of 5.4% and solely pay 0.6% to FUTA. So, the utmost quantity most employers pay into FUTA every year per worker is $42 ($7,000 X 0.6%). If a enterprise or state doesn’t obtain the tax credit score, the utmost quantity per worker is $420 ($7,000 X 6%).

State unemployment taxes and wage bases fluctuate by state. Sometimes, employers obtain notices from the state concerning their SUTA charge every year. States base employer charges on plenty of elements, together with the size of time you’ve been in enterprise, the variety of unemployment claims, and many others. Examine together with your state to find out the wage base and your unemployment tax charge. 

Your state might have extra taxes you pay as an employer (e.g., privilege tax). Contact your state for extra info. 

This text has been up to date from its unique publication date of August 9, 2021.

This isn’t meant as authorized recommendation; for extra info, please click on right here.



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