Soical Security and Medicare Taxes


Federal Insurance Contributions Act (FICA) taxes are deducted from an employee’s paycheck each pay period. Commonly referred to as Social Security taxes, there are actually two separate taxes: the Old-Age, Survivors and Disability Insurance (OASDI) tax and the Medicare Hospital Insurance (HI) tax. For calendar 2018, OASDI applies to the first $128,700 of wages.1 HI is 1.45% of all wages.




Patient Protection and Affordable Care Act

Beginning in 2013, the Patient Protection and Affordable Care Act imposed an additional Medicare tax on certain taxpayers:

  • 0.9% health insurance tax: Taxpayers with incomes above certain thresholds pay an additional HI tax of 0.9%. For an employee, the additional 0.9% effectively increases the HI tax from 1.45% to 2.35% on income in excess of the applicable threshold. For self-employed taxpayers, the additional tax of 0.9% effectively raises the HI tax rate to 3.8% of net self-employment income in excess of the applicable threshold. For selfemployed individuals, the additional 0.9% tax is not deductible. The thresholds are $250,000 in case of a joint return (the earnings of both spouses are considered) or a surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 for any other taxpayer.