How much do employers pay in payroll taxes?
so, how a lot is payroll tax ? The price of payroll taxes largely depends on the number of employees you have and how a lot you pay your employees. Why ? Because payroll taxes are a share of each employee ’ south crying taxable wages and not a set dollar sum .
Payroll tax includes two specific taxes : Social Security and Medicare taxes. Both taxes fall under the Federal Insurance Contributions Act ( FICA ), and employers and employees pay these taxes .
Payroll tax share is 15.3 % of an employee ’ second gross taxable wages. In total, Social Security is 12.4 %, and Medicare is 2.9 %, but the taxes are split evenly between both employee and employer.
then, how much is the employer monetary value of payroll taxes ? Employer payroll tax rates are 6.2 % for Social Security and 1.45 % for Medicare .
If you are freelance, you must pay the entirety of the 15.3 % FICA tax, plus the extra Medicare tax, if applicable ( and we ’ ll get to that in a minute ) .
Social Security taxes have a engage base. In 2021, this engage base is $ 142,800. The wage base means that you stop withholding and contributing Social Security taxes when an employee earns more than $ 142,800 .
Because of the wage base, the maximum total an employer contributes per employee for 2021 is $ 9,139.20 ( $ 142,800 X 6.2 % ) .
Take a look at an example. Let ’ s say you have an employee who earns $ 2,000 semiweekly :
$2,000 X 6.2% = $124
The employer monetary value of payroll tax is $ 124 .
Keep in heed that some pre-tax deductions ( for example, Section 125 plans ) can lower the gross taxable wages and impact how much you contribute per employee paycheck .
For example, an employee with gross wages of $ 1,500 semiweekly and a $ 500 Section 125 deduction has $ 1,000 in gross taxable wages ( $ 1,500 – $ 500 ). so, you calculate social Security on $ 1,000 rather of $ 1,500 :
$1,000 X 6.2% = $62
The employer cost of the Social Security tax is $ 62 .
Unlike Social Security, Medicare taxes do not have a engage base. alternatively, Medicare has an extra withholding tax tax for employees who earn more than a set sum. In 2021, this base measure is $ 200,000 ( individual ). consequently, employees who earn more than $ 200,000 in 2021 pay 1.45 % and an extra 0.9 % to Medicare .
Do employers pay the extra Medicare tax ? No, employers only pay 1.45 %, even if an employee earns more than $ 200,000. Additional Medicare tax only applies to employees .
For exemplar, an employee earns $ 250,000 per class, so the employee 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 entire crying wages :
$250,000 X 1.45% = $3,625
As the employer, you only pay $ 3,625 for Medicare taxes on the employee ’ s $ 250,000 .
Because the employee pays the extra Medicare tax, find the total tax total for $ 50,000 ( $ 250,000 – $ 200,000 ) :
$50,000 X 0.9% = $450
Add together the totals for both to find the total the employee pays :
$3,625 + $450 = $4,075
The employee pays $ 450 more in Medicare taxes than the employer in this exercise .
Like Social Security taxes, pre-tax deductions may impact Medicare tax calculations. Subtract applicable pre-tax deductions from the sum crude wages before calculating the Medicare tax amount to withhold and contribute .
For model, your employee earns $ 1,500 semiweekly but has a $ 500 Section 125 deduction. Calculate the Medicare taxes for $ 1,000 in crude taxable wages ( $ 1,500 – $ 500 ) :
$1,000 X 1.45% = $14.50
Withhold and contribute $ 14.50 for Medicare taxes .
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If you are freelance, pay the entire cost of payroll taxes ( aka self-employment taxes ). And, pay the extra 0.9 % Medicare tax, excessively, if you earn more than the doorsill per year .
Let ’ s say you earn $ 100,000 per year. You would pay the full 12.4 % of Social Security tax :
$100,000 X 12.4% = $12,400
Because you do not hit the engage base for Medicare, do not pay the extra 0.9 %. however, you must pay the fully 2.9 % of Medicare :
$100,000 X 2.9% = $2,900
Add together the amounts for both Social Security and Medicare :
$12,400 + $2,900 = $15,300
You can besides multiply your gross engage by the entirety of the FICA tax :
$100,000 X 15.3% = $15,300
If you earn more than $ 142,800, stop calculating Social Security tax on wages above the engage base. If you earn more than $ 200,000 ( individual ), breed all earnings over the basis by 3.8 % for the extra Medicare tax .
Employer-only paid taxes
In accession to the employer-employee payroll taxes you pay, there are other payroll taxes paid by employer on behalf of your employees. The two main taxes are :
*Some states ( for example, Pennsylvania ) include state unemployment tax as an employee-paid tax, excessively. Check with your country to see if your employees must pay into unemployment .
federal unemployment tax is 6.0 % on the first $ 7,000 in employee wages. however, most states and businesses receive a tax accredit of 5.4 % and only pay 0.6 % to FUTA. so, the maximum measure most employers pay into FUTA each year per employee is $ 42 ( $ 7,000 X 0.6 % ). If a business or state does not receive the tax credit, the utmost amount per employee is $ 420 ( $ 7,000 X 6 % ) .
State unemployment taxes and engage bases vary by submit. typically, employers receive notices from the express regarding their SUTA rate each year. States base employer rates on a number of factors, including the duration of time you ’ ve been in business, the total of unemployment claims, etc. Check with your express to determine the wage base and your unemployment tax rate .
Your state may have extra taxes you pay as an employer ( for example, prerogative tax ). Contact your country for more data.
This is not intended as legal advice ; for more information, please chatter here.