How are payroll taxes calculated?

Multiply gross wages by each tax rate: Social Security 6.2%, Medicare 1.45%, FUTA 0.6-6%, SUTA 1-5%. Employee and employer each pay FICA.

What is the FICA tax rate?

FICA is 7.65% total — 6.2% Social Security and 1.45% Medicare. Employers match this amount for a combined 15.3%.

What's the difference between employee and employer payroll taxes?

Employee taxes are deducted from wages (FICA, federal/state income tax). Employer taxes are paid on top of wages (FICA match, FUTA, SUTA).

FUTA is the Federal Unemployment Tax Act. Employers pay 6% on first $7,000 of wages, but can get up to 5.4% credit, making effective rate 0.6%.

SUTA is State Unemployment Tax. Rates vary by state (typically 1-5%) and apply to first $10,000-$30,000 of wages per employee.

Payroll Tax Calculator – Calculate FICA, FUTA & SUTA Taxes (2026)

Q: What is a payroll tax calculator?

A payroll tax calculator estimates employee and employer payroll taxes including federal income tax, Social Security, Medicare, FUTA, and SUTA.

What is a Payroll Tax Calculator?

A payroll tax calculator is a specialized financial tool that estimates the various taxes associated with employing workers. Unlike a simple paycheck calculator that focuses only on employee take-home pay, a payroll tax calculator provides a complete picture of all payroll-related taxes—both those deducted from employee wages and those paid directly by employers.

For small business owners, understanding payroll taxes is crucial. Many entrepreneurs underestimate the true cost of hiring employees. The gross salary you offer is just the starting point—you'll also need to factor in Social Security, Medicare, FUTA, SUTA, and potentially other state and local taxes. A payroll tax calculator helps you budget accurately and avoid financial surprises.

For employees, understanding payroll taxes helps you interpret your pay stub and know exactly where your money is going. It's an essential part of financial literacy that empowers you to make informed decisions about salary negotiations, retirement planning, and tax strategy.

How Payroll Taxes Are Calculated

Payroll taxes fall into two main categories: employee-paid taxes and employer-paid taxes. Here's how each is calculated:

Employee-Paid Taxes

Federal Income Tax: Based on W-4 withholding and tax brackets (10-37%)
State Income Tax: Varies by state (0-13.3%)
Social Security: 6.2% of gross wages (up to wage base limit)
Medicare: 1.45% of gross wages (no limit, additional 0.9% for high earners)

Employer-Paid Taxes

Social Security: 6.2% matching contribution
Medicare: 1.45% matching contribution
FUTA: 6% on first $7,000 (up to 5.4% credit, effective 0.6%)
SUTA: Varies by state (typically 1-5% on first $10,000-$30,000)

Payroll Tax Formula

Employee FICA = Gross Wages × 7.65% (6.2% + 1.45%)

Employer FICA = Gross Wages × 7.65% (matching)

FUTA = Gross Wages (first $7,000) × 0.6%

SUTA = Gross Wages (first $10k-$30k) × State Rate

Employee Net Pay = Gross Wages − Federal Tax − State Tax − FICA − Other Deductions

Total Employer Cost = Gross Wages + Employer FICA + FUTA + SUTA

Federal Income Tax and FICA

Federal income tax is a progressive tax based on your taxable income. The IRS uses seven brackets ranging from 10% to 37%. Your withholding depends on your W-4 form, filing status, and income level. FICA taxes are separate and flat-rate—they fund Social Security and Medicare programs.

The distinction is important because federal income tax can be reduced through deductions and credits, while FICA taxes cannot. FICA is calculated on your gross wages before most deductions, though pre-tax contributions like 401(k) and HSA can reduce FICA taxable base.

For 2026, the Social Security wage base is $168,600. Income above this amount is not subject to Social Security tax, though Medicare continues to apply. High earners also pay an additional 0.9% Medicare surtax on income above $200,000 (single) or $250,000 (married).

Social Security and Medicare Taxes

Social Security (OASDI) and Medicare (HI) are the two components of FICA tax. Together they represent 7.65% of gross wages from the employee and another 7.65% from the employer—a combined 15.3%.

Tax	Employee	Employer	Total
Social Security	6.2%	6.2%	12.4%
Medicare	1.45%	1.45%	2.9%
Total FICA	7.65%	7.65%	15.3%

Payroll Tax Example

Employee earns $60,000 annually:

Gross Wages	$60,000.00
Federal Tax (12%)	−$7,200.00
State Tax (5%)	−$3,000.00
Employee Social Security (6.2%)	−$3,720.00
Employee Medicare (1.45%)	−$870.00
Other Deductions	−$3,000.00
Employee Net Pay	$42,210.00
Employer Social Security	+$3,720.00
Employer Medicare	+$870.00
FUTA (0.6%)	+$360.00
SUTA (2.7%)	+$1,620.00
Total Employer Cost	$66,570.00

Employee vs Employer Payroll Taxes

The most confusing aspect of payroll is the split between employee and employer taxes. Social Security and Medicare are split evenly—each pays 7.65%. However, FUTA and SUTA are paid entirely by the employer. This means the true cost of employment is higher than the gross salary suggests.

For every dollar of gross wages, employers typically pay an additional 7-10 cents in payroll taxes. A $60,000 salary costs approximately $66,000-$67,000 in total when employer taxes are included. This hidden cost is why many small businesses carefully consider whether to hire employees versus independent contractors.

Understanding this distinction helps both parties in salary negotiations. Employees should recognize that their employer is paying more than the stated salary. Employers should factor in these costs when budgeting for new positions.