If you want the one-line version: employer and employee split Social Security and Medicare down the middle, the employer alone pays unemployment tax, and the employee alone pays income tax withholding. Almost everything else is a variation on those three rules.
Every figure below is dated. Payroll numbers change annually — check the year before you rely on one.
The taxes you split: Social Security and Medicare (FICA)
These show up as a deduction on the employee's stub *and* cost the employer the same amount again on top.
Social Security: 6.2% each, up to a cap
For 2026, the rate is 6.2% withheld from the employee and 6.2% paid by the employer, on wages up to an annual cap. That cap, the Social Security wage base, is $184,500 for 2026, up from $176,100 in 2025 (SSA press release, October 24, 2025; IRS Topic No. 751).
Once an employee crosses the wage base, both sides stop paying Social Security tax on that employee for the rest of the year. It resets January 1.
The cap applies per employer, not per person. Someone with two jobs has it applied separately by each, and claims any excess as a credit on their own return.
Medicare: 1.45% each, no cap
1.45% from the employee, 1.45% from the employer, on every dollar of wages. There is no wage base limit for Medicare — structural, not an annual figure.
Additional Medicare Tax: 0.9%, employee only
This is the one people get wrong. Once an employee's wages from *your* company pass $200,000 in a calendar year, you must withhold an extra 0.9% on the excess. The employer does not match it. You withhold and remit, nothing more.
That $200,000 trigger ignores filing status. Their actual liability is figured on their return against thresholds that do depend on it: $200,000 single, $250,000 married filing jointly, $125,000 married filing separately. Those are statutory and not indexed, so unlike most payroll figures they do not move each year. The reconciliation is the worker's job, not yours (IRS Topic No. 751).
The tax only the employer pays: unemployment
FUTA
Federal unemployment tax is entirely the employer's cost. Never deduct it from a paycheck.
The gross rate is 6.0% on the first $7,000 of each employee's wages per year. Pay your state unemployment tax in full and on time and you generally get a credit of up to 5.4%, dropping the effective rate to 0.6% — about $42 per employee per year (IRS Topic No. 759). That $7,000 is fixed in statute and does not move annually.
The credit is not automatic. A state with unpaid federal unemployment loans two years running becomes a Department of Labor credit reduction state, and employers there owe more per employee. DOL publishes the final list each November, so check before you prepare Form 940.
SUTA
State unemployment tax is also employer-paid in most states, but at a rate assigned to *your* business through experience rating, on a state-specific wage base. Two companies on the same street can pay very different rates.
Three states are the exception. Alaska, New Jersey, and Pennsylvania require an employee contribution to unemployment, withheld from pay. If you are outside those three and you see a UI deduction on a stub, something is wrong.
Many states also fund paid family and medical leave, temporary disability, workforce development, or local transit and occupational taxes through payroll. Some are employee-funded, some employer-funded, some split — check your state labor and revenue agencies, plus any city or county with its own levy.
The tax only the employee pays: income tax withholding
Federal income tax withholding is entirely the employee's money. The employer calculates it from the Form W-4 and remits it. It is never an employer expense, just the worker's own tax paid in installments. Same for state and local income tax withholding where those exist.
Two things that trip people up
The tips and overtime deductions do not change payroll tax. For tax years 2025 through 2028, individuals may deduct qualified tips and qualified overtime compensation on their income tax return. Those wages stay subject to Social Security and Medicare tax on both the employee and the employer side (IRS Notice 2025-69 and related tips/overtime guidance). The break happens on the worker's return, not in your payroll math. Do not zero out FICA on a tipped or overtime dollar.
Self-employed people pay both halves. Instead of FICA you owe self-employment tax: 12.4% for Social Security up to the same annual wage base, plus 2.9% for Medicare with no cap, 15.3% combined. It is figured on 92.35% of net earnings, and you deduct the employer-equivalent half when computing income tax. This is why the same headline rate feels different as a contractor than as an employee.
What it actually costs to add a person
Budget roughly 7.65% above the wage for the employer share of FICA, plus unemployment, plus whatever your state layers on. Above the Social Security wage base the employer's marginal FICA cost drops to 1.45%, because the 6.2% piece has stopped for the year. Price all of it in before you make an offer, not after the first payroll run.
Keep the categories straight on the stub. Employee-side taxes are deductions from gross pay. Employer-side taxes never appear there — they are your expense. A stub that deducts FUTA, or shows the employer share of FICA coming out of the worker's pay, is wrong.
UWageCo prepares pay statements from figures you supply — gross pay, each employee-side tax on its own line, net pay. It prepares documents only: it does not file returns or remit deposits with any tax authority, and every document carries a disclosure that the data came from the customer and was not independently verified. Forms 941 and 940 and your state returns stay with you or your accountant.
Look it up instead of memorizing it
Almost every figure above moves annually. Worth bookmarking:
- IRS Publication 15 (Circular E), the employer's tax guide, reissued every year
- IRS Topic No. 751 for Social Security and Medicare rates and the current wage base
- IRS Topic No. 759 for FUTA and Form 940
- Your state labor and revenue agencies for SUTA rate notices and paid-leave contribution rates
This is general information, not legal or tax advice. Treatment depends on your state, entity type, and how your workers are classified. Talk to a CPA, a payroll professional, or the agency about your own situation.