For wages earned in 2013, the FICA tax rate will be 15.3%. However, that doesn’t mean 15.3% of your paycheck will be withheld for Social Security and Medicare taxes. Only half that amount (7.65%) will be taken out because your employer pays the other half.
If you are self-employed then you pay both halves. Any money you make over $113,700 for tax year 2013 will not be subject to Social Security taxes.
You’ll be doing your 2013 taxes in 2014, when W2, 1099s and other IRS tax forms become available for the just-closed tax year. One change for the 2014 FICA tax is that there is now an Additional Medicare Tax.
What’s New for 2014: the Additional Medicare Tax
Any wages earned after January 1, 2013 will be subject to an additional Medicare tax if their wages surpass a certain threshold. For 2013 tax year, which you’ll be preparing in 2014, any wages over $200,000 will be subject to extra tax. It’s 0.9% of anything over the threshold. There is no limit to the wages that are now subject to the Medicare Tax.
The entire 0.9% of the Additional Medicare Tax is paid through withholding. The employer doesn’t pay half, as is done in the other FICA taxes. The employee pays the entire 0.9%.
The Wage Base Limit for Social Security Tax
Social Security taxes are 12.4% of your wages, but only up to a certain amount of wages. (12.4% is split between you and your employer). For figuring the 2014 FICA tax (for wages earned in 2013), the limit is $113,700. That means any wages earned over $114,700 will not be subject to Social Security taxes. This threshold is called the wage base limit. This changes every year, rising to keep up with inflation.
To find out the current FICA tax or the wage base limit, you can always consult the latest version of IRS Publication 15, (Circular E) Employer’s Tax Guide. It’s the complete guide for Employers who must figure out how much withholding to take out of their employees’ paychecks. It has all the FICA information that’s necessary.