• The federal payroll taxes (US)
  • Who pays which share (US, 2026)

Payroll tax is the set of taxes tied to the wages a business pays its employees. In the US, at the federal level, that means federal income tax withheld from each paycheck, Social Security and Medicare taxes (together called FICA), which the employer and the employee each pay a share of, and federal unemployment tax (FUTA), which only the employer pays. The 2026 rates below are quoted from the IRS. This page explains how the taxes work; it isn't tax advice, so ask your accountant or a tax professional about your own payroll.

The federal payroll taxes (US)

This section quotes IRS Publication 15 (2026), (Circular E), Employer's Tax Guide and IRS Topic no. 751, Social Security and Medicare withholding rates ("Page Last Reviewed or Updated: 24-Sep-2026"), both opened October 30, 2026.

Federal income tax withholding

Publication 15 says to "Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee’s Form W-4 and the correct withholding table in Pub. 15-T." The employee's Form W-4 sets how much is withheld; see what is a W-4 form.

Social Security and Medicare (FICA)

Topic 751 explains that FICA taxes "are composed of the old-age, survivors, and disability insurance taxes, also known as Social Security taxes, and the hospital insurance taxes, also known as Medicare taxes."

Publication 15 gives the 2026 figures: "For 2026, the social security tax rate is 6.2% (amount withheld) each for the employer and employee (12.4% total). The social security wage base limit is $184,500. The tax rate for Medicare is 1.45% (amount withheld) each for the employee and employer (2.9% total). There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax."

So the employer withholds the employee's share from wages and also pays a matching employer share.

Additional Medicare Tax

Publication 15 says: "In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year." It adds: "Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax."

Federal unemployment tax (FUTA)

Publication 15 says: "Only the employer pays FUTA tax; it isn’t withheld from the employee’s wages." For the rate, it says: "For 2026, the FUTA tax rate is 6.0%. The tax applies to the first $7,000 you pay to each employee as wages during the year." It goes on: "Generally, you can take a credit against your FUTA tax for amounts you paid into state unemployment funds. The credit may be as much as 5.4% of FUTA taxable wages. If you’re entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.6%."

Whether you're subject to FUTA, and whether you're entitled to the full credit, depends on tests and conditions in Publication 15 and the Instructions for Form 940. Ask your accountant.

State and local payroll taxes

States, and some localities, have their own payroll taxes, such as state unemployment tax and state income tax withholding. The rules and rates vary by state, so check your state's revenue and labor departments.

Who pays which share (US, 2026)

  • Withheld from the employee's wages: federal income tax, the employee's 6.2% Social Security and 1.45% Medicare, and any 0.9% Additional Medicare Tax.
  • Paid by the employer in addition to wages: the matching 6.2% Social Security and 1.45% Medicare, and FUTA.

Publication 15's checklist includes "Furnish each employee a Form W-2"; see what is a W-2 form. On who counts as an employee, Publication 15 says: "Generally, people in business for themselves aren’t employees." For people who work for themselves, see what is self-employment tax and what is a 1099 form.

Sample: one employee's 2026 federal payroll taxes

This is a sample with invented figures, using the 2026 rates quoted above. An employee earns $60,000.00 in wages in 2026. That's below the $184,500 Social Security wage base and the $200,000 Additional Medicare threshold, so neither limit comes into play. Federal income tax withholding isn't shown, because it depends on the employee's Form W-4.

  • Employee's Social Security: 6.2% × $60,000.00 = $3,720.00, withheld
  • Employee's Medicare: 1.45% × $60,000.00 = $870.00, withheld
  • Employer's Social Security: 6.2% × $60,000.00 = $3,720.00
  • Employer's Medicare: 1.45% × $60,000.00 = $870.00
  • FUTA, if the employer is entitled to the maximum 5.4% credit: 0.6% × $7,000.00 = $42.00
  • Total FICA: $3,720.00 + $870.00 + $3,720.00 + $870.00 = $9,180.00, which is 15.3% of $60,000.00

The employer's own cost in this sample is $3,720.00 + $870.00 + $42.00 = $4,632.00, in addition to the wages. The FUTA line changes if the employer isn't entitled to the full credit.

Where Billed fits

Billed's financial reporting page says: "All reports in Billed can be exported for use with your accountant, bookkeeper, or tax software."

Related Articles

Frequently Asked Questions

What are the 2026 Social Security and Medicare tax rates?

In the US, IRS Publication 15 (2026) gives a Social Security tax rate of 6.2% each for the employer and employee, 12.4% in total, on wages up to the $184,500 wage base, and a Medicare tax rate of 1.45% each, 2.9% in total, with no wage base limit.

Does the employer pay the Additional Medicare Tax?

No. Publication 15 says: "Additional Medicare Tax is only imposed on the employee." There's no employer share. It also says "you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year."

Who pays FUTA tax?

Publication 15 says: "Only the employer pays FUTA tax; it isn't withheld from the employee's wages." For 2026, the rate is 6.0% on the first $7,000 of each employee's wages. For the credit for state unemployment tax, it says: "The credit may be as much as 5.4% of FUTA taxable wages." Ask your accountant whether you qualify for the full credit.

How much payroll tax is paid on a $60,000 salary?

In the sample on this page, using the 2026 rates, Social Security and Medicare total $9,180.00, split equally between the employee and the employer, and FUTA is $42.00 if the employer is entitled to the maximum credit. Federal income tax withholding depends on the employee's Form W-4.

Share

Was this article helpful?