Understanding how to calculate FICA tax is essential for both employees and employers in the United States. FICA, which stands for the Federal Insurance Contributions Act, is a payroll tax that funds Social Security and Medicare programs. In this article, we will provide a step-by-step guide on how to calculate FICA tax in 2022.

Step 1: Know the 2022 FICA Tax Rates

Before calculating your FICA tax, it’s essential to know the current rates. For 2022, the rates are as follows:

1. Social Security Tax: 6.2% for employees and an additional matching 6.2% for employers, up to a maximum wage base of $147,000.

2. Medicare Tax: 1.45% for both employees and employers, with no maximum wage cap.

Additionally, there’s an Additional Medicare Tax of 0.9% applied to employees with earned income exceeding certain thresholds – $200,000 for individuals, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately.

Step 2: Calculate Social Security Tax

To calculate the Social Security tax:

1. Determine your gross income (before deductions) up to the wage base ($147,000 in 2022).

2. Multiply your gross income by the employee Social Security tax rate (6.2%).

For example, if your annual gross income is $50,000:

$50,000 x 0.062 = $3,100

This means you will owe $3,100 in Social Security tax for the year.

Step 3: Calculate Medicare Tax

To calculate Medicare tax:

1. Determine your total gross income without any wage cap.

2. Multiply your gross income by the employee Medicare tax rate (1.45%).

For example, if your annual gross income is $50,000:

$50,000 x 0.0145 = $725

This signifies you will owe $725 in Medicare tax for the year.

Step 4: Calculate Additional Medicare Tax (If Applicable)

If your income exceeds the threshold for the Additional Medicare Tax, use this calculation:

1. Subtract the applicable threshold amount from your total gross income.

2. Multiply the result by the Additional Medicare Tax rate (0.9%).

For example, if you’re a single filer with a gross income of $220,000:

$220,000 – $200,000 = $20,000

$20,000 x 0.009 = $180

This means you will owe an additional $180 in Additional Medicare Tax for the year.

Step 5: Add Up Your FICA Taxes

Combine your calculated Social Security tax, Medicare tax, and any Additional Medicare Tax to find your total FICA taxes for the year.

Using our previous examples:

Social Security Tax: $3,100

Medicare Tax: $725

Additional Medicare Tax: $180

Total FICA Taxes: $3,100 + $725 + $180 = $4,005

Conclusion

Calculating FICA tax is an essential aspect of managing payroll and budgeting. By understanding the current rates and following this step-by-step guide, you can accurately calculate your FICA taxes for 2022.