How To Calculate FICA Withholding

The FICA (Federal Insurance Contributions Act) withholds a certain percentage of your paycheck every time your employer pays you. Do you understand how to check it? Do you know how to make sure that you and your employer are paying the right amount? Even just for your own understanding of how the tax system works is important enough to figure out how to calculate FICA withholding.

It is important to understand a little bit about FICA first. FICA is composed of two separate taxes, Social Security (Old-Age, Survivors, and Disability Insurance or OASDI) and Medicare. Both of these are charged different tax rates, but the combination of the two make up the FICA withholding amount. So far this is pretty simple:

FICA=Social Security withholding + Medicare withholding

As of 2009, Social Security withholding was 6.2% and Medicare withholding was 1.45%. So we can plug this into our formula from above.

FICA=6.2%+1.45% or FICA withholdings total of 7.65%.

So far, this is straightforward. So, let us make it a bit more complicated. Social Security (the 6.2%) applies only to the first $106,800 of taxable income. This means that the Social Security withholding will not be more than $6621.60.

To figure out your total FICA tax burden, figure out what your taxable income is. This is typically your gross income, minus any pre-tax monies for insurance, 401K and the like. Take this amount and apply it to the following formula:

Gross Pay (minus pre-tax) * 6.2 / 100 = withholdings for Social Security

Gross Pay (minus pre-tax) * 1.45 / 100 = withholdings for Medicare
Adding these two numbers up calculates your FICA withholding amount.


Adjusted Gross Income (Gross income minus pre-tax deduction): 100,000

To determine Social Security: 100,000 * 6.2 / 100 = 6200

Remember the maximum amount for withholding on Social Security is 6621.60, so if the calculated number is higher, then you would use 6621.60.

To determine Medicare: 100,000 * 1.45 / 100 = 1450

Total FICA is 6200 +1450 or $7650

What happens if I am self employed?
Those of us who work directly for someone, have a great benefit. Our employer pays half of our FICA tax bill. This means that for those of you that are self-employed, you actually pay double the amount of taxes, when self-employed.

The Social Security tax rate would be 12.4% and the Medicare at 2.9% making the total FICA withholding 15.3%. This is the downside to being self-employed, a heavier tax burden.

What if I work for someone and am self-employed? In this case, you would have to do two separate calculations. Each calculation would have to be worked out with the appropriate percentages. You would take both calculations and add them together to calculate your FICA withholdings.

While this may all seem very complicated, with just a little thought, you can get through it. It is important to understand, not only so you can catch mistakes that you or your employer might make on your withholdings, but it helps you budget yourself as well.


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