United States

Social security contributions in detail

Both the employer and employee are subject to separate social security taxes, payable to the Social Insurance Funds, of 6.20% each (i.e. a total of 12.4%) of the employee’s gross wage amount, up to but not exceeding the Social Security Wage Base, indexed to USD 132,900 (EUR 115,837.50) in 2019. Wages earned over the maximum wage base are not subject to Social Security tax.

To fund Medicare, a separate tax of 1.45% of the employee’s income is paid directly by the employer, and an additional 1.45% tax is withheld from the employee’s pay cheque, for a total of 2.9%. In tax years 2013 and later, an Additional Medicare Tax applies to an individual’s Medicare wages that exceed a threshold amount based on the taxpayer’s filing status. Employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual’s wages paid in excess of USD 200,000 (EUR 174,322.96) in a calendar year (USD 250,000 for married couples filing jointly, i.e. EUR 217,903.70).

An employer is required to begin withholding Additional Medicare Tax in a pay period in which it pays wages in excess of USD 200,000 (EUR 174,322.96) to an employee and to continue to withhold it for each pay period until the end of the calendar year.

There is no employer match for Additional Medicare Tax.

Employers also pay federal and state unemployment insurance taxes on employee wages. The federal unemployment insurance tax rate is 6% on the first USD 7,000 of wages (EUR 6,101.30), but credit is given for state unemployment insurance taxes paid on time that may lower the federal rate to as low as 0.6%. State unemployment insurance tax rates and the wage base against which the state rates apply vary depending on the state, general demand for unemployment benefits, and the frequency of claims by former employees of the employer.

There are two deposit schedules for social security and Medicare taxes, monthly and semi-weekly. Before the beginning of each calendar year, the employer must determine which of the two deposit schedules they are required to use and pay accordingly. Federal unemployment insurance tax deposits are generally payable quarterly.

Note that a few states have short-term disability insurance programmes (California, Hawaii, New Jersey, New York, and Rhode Island). These may be funded by employee or employer contributions, depending on the state. Additionally, all states generally mandate that employers maintain insurance for lost wages and medical costs related to work-related injuries and accidents.

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Author: FordHarrison

Date: March 2019

Note: All currency conversions into EUR were made on 1 February 2019, using a mid-market rate.