Federal Insurance Contributions Act (FICA) Tax

The Federal Insurance Contributions Act (FICA) tax is a payroll tax that is imposed on both employers and employees. It is used to fund Social Security and Medicare programs. The FICA tax is composed of two parts: the Social Security tax and the Medicare tax. The Social Security tax is 6.2% of an employee’s wages, up to a maximum of $132,900 in 2021. The Medicare tax is 1.45% of an employee’s wages, with no maximum limit. Employers are also required to pay the same amount of FICA taxes as their employees.

History of the FICA Tax

The FICA tax was first enacted in 1935 as part of the Social Security Act. The original tax rate was 1% of wages, with a maximum of $3,000. Over the years, the tax rate has increased and the maximum wage limit has been raised. In 1977, the Medicare tax was added to the FICA tax, increasing the total rate to 7.65%. In 2021, the total rate is 7.65%, with the Social Security tax rate at 6.2% and the Medicare tax rate at 1.45%.

Comparison of FICA Tax Rates

Summary

The Federal Insurance Contributions Act (FICA) tax is a payroll tax that is imposed on both employers and employees. It is used to fund Social Security and Medicare programs. The FICA tax is composed of two parts: the Social Security tax and the Medicare tax. The Social Security tax is 6.2% of an employee’s wages, up to a maximum of $132,900 in 2021. The Medicare tax is 1.45% of an employee’s wages, with no maximum limit. Employers are also required to pay the same amount of FICA taxes as their employees. For more information about the FICA tax, visit the Internal Revenue Service website or the Social Security Administration website.

See Also

• Social Security Tax
• Medicare Tax
• Payroll Tax
• Income Tax
• Self-Employment Tax
• Unemployment Tax
• Federal Tax Withholding
• Taxable Income
• Tax Brackets
• Tax Credits

Do you like the post? Share it now: