FICA Tax Rate 2024 – Wages Limit and Exemptions!

The US earners pay payroll taxes under the Federal Insurance Contributions Act (FICA), and the tax rates under FICA hold great importance for employers and employees. The article covers everything you wish to know about the 2024 FICA tax rates. 

FICA Tax Rate 2024

The working class of the USA is entitled to pay payroll taxes under the Federal Insurance Contributions Act (FICA) to fund Social Security and Medicare benefits offered to veterans, disabled, survivors, and retirees.

The taxes under FICA cover  Social Security taxes/OASDI (old-age, survivors, and disability insurance taxes) and Medicare taxes/ hospital insurance taxes. The tax rates for each tax are different and taxpayers have to pay jointly under FICA taxes. 

The tax rates of FICA are administered by the Social Security Administration and are set by Social Security laws. The tax rates define your payroll taxes on your earnings. 

The FICA tax rates have not increased since 1994 after the change in 1959 and 1985. The Social Security tax rate is 6.2% and the Medicare tax rate is 1.45%, making FICA tax rates 7.65% for each contributing party employee and employer. 

Employers and Employees contribute equally under the FICA taxes, so in total, they contribute 15.3% of the earnings in Social Security funds through payroll taxes. 

Here’s your 2024 FICA tax rate distribution for US people :

FICA Tax Employees  Employers 
Social Security Tax  6.2% 6.2%
Medicare Tax 1.45% 1.45%
Total  7.65% 7.65%

FICA Tax Wages Limit for 2024

Like federal taxes, the payroll taxes are also subjected to wage limits. Under FICA, only the social security taxes are subjected to wage limits, whereas Medicare taxes have no wage limits, meaning all covered wages are entitled to hospital insurance taxes/ Medicare taxes. 

  • The Social Security Administration (SSA) has announced the increase in the 2024 wage limit for Social Security taxes from $160,200 to $168,600 for taxpayers subject to Social Security taxes. 
  • However, the employees pay an additional Medicare tax of 0.9% on employees’ wage compensation that exceeds the annual threshold income of $200,000 (for individuals), $250,000 (joint filers, or $124,000 (for married couples who filed the taxes separately). 

This year, the maximum earning subjected to Social Security taxes is increased by $8,400 and the maximum employer contribution to Social Security is raised by $520.8.

Hence, the employee will be contributing the maximum tax on their earnings over $168,600 is $10,453.20 and a self-employed person would contribute around $20906.4 under the Social Security tax. 

How does the FICA tax work on your earnings?

The FICA taxes are applied to the earnings of US people, the employers and employees both contribute equally to pay the total FICA tax, be it OSADI and Medicare taxes. 

FICA taxes are mandatory for everyone to share their earnings with the federal government through payroll taxes. Through these taxes, the government aims to get funds for Social Security from working people during their working period, so later in their lives, they can count on security benefits.  

The employers withhold the payroll taxes from the paychecks of the employees on the employees’ behalf and pay the tax. 

Self-employed people are subjected to paying the FICA tax under the Self-Employment Contributions Act (SECA), where they have to pay the portion of the employee as well, hence, they will be paying taxes with a total 15.3% rate on their earnings. 

However, the SECA taxpayers can deduct the paid FICA tax in their tax returns and lower their income tax bill for the tax year. 

Who are exempted from FICA taxes?

The FICA taxes are mandatory for everyone, even for non-citizens working in the USA. However, there are a few exceptions applicable to FICA taxes, such as:

  • College students who earn through an on-campus job
  • Foreign government employees and teachers
  • Foreign employers to avoid double taxation
  • Foreign agricultural workers with H-2A non-immigrant status
  • Nonresidents who are temporarily present in the states or have F-1, M-1, Q-1, or J-1 nonimmigrant status
  • Religious groups (like Amish) can apply for exemption through IRS Form 4029. 

The Federal government implemented the FICA tax to give the money back to the working class of America when they retire. A small portion of their earnings goes to the Social Security funds through FICA or payroll taxes. 

The current tax rates would let you know how much money will be withheld from your earned income, however, when you change jobs pay attention to your FICA taxes to avoid overpaying. 

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