💼 How to Calculate Payroll Taxes in 2026
Complete Guide for Employers & Employees: FICA, Medicare, Federal & State Withholding
📋 Table of Contents
🎯 Key Takeaway
Total Payroll Tax = FICA (Social Security + Medicare) + Federal Withholding + State Withholding. Employees pay 7.65% FICA; employers match this. Additionally, employers pay FUTA (0.6%) and SUTA (varies by state).
1. Payroll Tax Overview
Payroll taxes are taxes withheld from employee wages and paid by employers to fund government programs. These include:
- FICA taxes — Social Security and Medicare (split between employer/employee)
- Federal income tax withholding — Based on W-4 and income
- State income tax withholding — Varies by state (9 states have none)
- FUTA — Federal Unemployment Tax (employer only)
- SUTA — State Unemployment Tax (employer only, some states require employee contribution)
💡 Employer vs Employee Responsibility
- Employee pays: Social Security (6.2%), Medicare (1.45%), federal/state income tax
- Employer pays: Matching Social Security (6.2%), Medicare (1.45%), FUTA, SUTA
- Total employer cost: Generally 7.65%+ above gross wages
2. Types of Payroll Taxes
2.1 FICA Taxes (Social Security & Medicare)
FICA stands for Federal Insurance Contributions Act and funds:
- Social Security (OASDI): 12.4% total (6.2% each from employer and employee)
- Medicare (HI): 2.9% total (1.45% each from employer and employee)
2.2 Federal Income Tax Withholding
Based on employee's W-4, filing status, and income. Uses IRS Publication 15-T wage bracket or percentage method tables.
2.3 State Income Tax Withholding
Varies by state. Nine states have no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
2.4 FUTA (Federal Unemployment)
6.0% on first $7,000 of wages per employee. Credit of up to 5.4% for timely SUTA payments reduces effective rate to 0.6%.
2.5 SUTA (State Unemployment)
Rates vary by state and employer experience rating. Typically 0.5% to 5.4%+ on a wage base of $7,000 to $50,000+.
3. 2026 Payroll Tax Rates
| Tax Type | Employee Rate | Employer Rate | Wage Base |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | $176,100 |
| Medicare | 1.45% | 1.45% | No limit |
| Additional Medicare | 0.9% | 0% | Over $200K (single) |
| FUTA | 0% | 0.6%* | $7,000 |
| SUTA | Varies | Varies | Varies by state |
*FUTA is 6.0% but reduced to 0.6% with full SUTA credit
⚠️ 2026 Social Security Wage Base
For 2026, the Social Security wage base is $176,100. Once an employee earns this amount, no additional Social Security tax is withheld. Medicare has no wage cap. An additional 0.9% Medicare applies to wages over $200,000 (single) or $250,000 (married).
4. Payroll Tax Formulas
4.1 Social Security Tax
📐 Formula: Social Security Tax
Applies to wages up to $176,100 in 2026 (both employer and employee)
4.2 Medicare Tax
📐 Formula: Medicare Tax
No wage limit. Add 0.9% on wages over $200K (employee only)
4.3 Total FICA (Employee or Employer Share)
📐 Formula: FICA Tax
Each party (employer and employee) pays 7.65%
4.4 FUTA Tax (Employer)
📐 Formula: FUTA Tax
Maximum $42 per employee per year (with full SUTA credit)
4.5 Total Employer Payroll Tax Cost
📐 Formula: Total Employer Cost
Typically adds 8-12% to gross wages depending on state
5. Payroll Tax Calculator 2026
Calculate employee and employer payroll taxes based on gross wages:
6. Step-by-Step Calculation
- Start with Gross Pay: Total wages before any deductions
- Check SS Wage Base: If YTD wages < $176,100, calculate Social Security
- Calculate Social Security: Gross × 6.2% (for both employee and employer)
- Calculate Medicare: Gross × 1.45% (no wage limit)
- Add Additional Medicare: If over $200K, add 0.9% (employee only)
- Calculate FUTA: First $7,000 × 0.6% (employer only)
- Calculate SUTA: Wage base × state rate (employer only)
- Calculate Federal Withholding: Use IRS Pub 15-T tables based on W-4
- Calculate State Withholding: Use state tax tables if applicable
7. Worked Examples
Example 1: Bi-Weekly Payroll
📝 Problem
An employee earns $3,000 bi-weekly (26 pay periods). YTD wages are $48,000. SUTA rate is 2.7%. Calculate payroll taxes.
YTD $48,000 + $3,000 = $51,000 < $176,100 ✓
Full $3,000 subject to SS tax
Social Security: $3,000 × 6.2% = $186.00
Medicare: $3,000 × 1.45% = $43.50
Total FICA: $186 + $43.50 = $229.50
Social Security: $3,000 × 6.2% = $186.00
Medicare: $3,000 × 1.45% = $43.50
FUTA: YTD $48,000 > $7,000 = $0
SUTA: YTD $48,000 > $7,000 = $0
Total Employer: $186 + $43.50 = $229.50
Answer: Employee pays $229.50 FICA. Employer pays $229.50. Total cost to employer: $3,229.50.
Example 2: First Paycheck of Year
📝 Problem
New employee's first weekly paycheck is $1,500. SUTA rate 3.2%. YTD wages = $0.
Social Security: $1,500 × 6.2% = $93.00
Medicare: $1,500 × 1.45% = $21.75
Total FICA: $114.75
Social Security: $1,500 × 6.2% = $93.00
Medicare: $1,500 × 1.45% = $21.75
FUTA: $1,500 × 0.6% = $9.00
SUTA: $1,500 × 3.2% = $48.00
Total Employer: $93 + $21.75 + $9 + $48 = $171.75
Answer: Employee pays $114.75 FICA. Employer pays $171.75 in taxes. Total employer cost: $1,671.75.
Example 3: High Earner Hitting SS Cap
📝 Problem
Executive earns $15,000 bi-weekly. YTD wages are $168,000. Calculate SS tax for this paycheck.
$168,000 + $15,000 = $183,000
SS Cap = $176,100
Wages subject to SS: $176,100 − $168,000 = $8,100
Employee SS: $8,100 × 6.2% = $502.20
Employer SS: $8,100 × 6.2% = $502.20
(Remaining $6,900 is NOT subject to SS)
Employee Medicare: $15,000 × 1.45% = $217.50
Employer Medicare: $15,000 × 1.45% = $217.50
Answer: Employee FICA: $719.70. Next paycheck will have $0 SS (cap reached).
8. Employer Obligations
📋 Employer Responsibilities
- Withhold employee taxes — FICA and income taxes from each paycheck
- Pay employer share — Match FICA, pay FUTA and SUTA
- Deposit taxes timely — Monthly or semi-weekly based on deposit schedule
- File Form 941 — Quarterly federal tax return
- File Form 940 — Annual FUTA return
- Issue W-2s — By January 31 each year
- Keep records — Maintain payroll records for 4+ years
⚠️ Deposit Due Dates
- Monthly depositors: By 15th of following month
- Semi-weekly depositors: Within 3 business days of payroll
- Penalties: 2% to 15% for late deposits; 100% for failure to deposit