2011 FICA Tax Rates

FICA Tax

Payroll taxes for Social Security benefits are collected under the authority of the Federal Insurance Contributions Act or FICA.  Most people simply refer to these taxes as FICA tax.  This tax had its origins back in 1935, when the tax was part of the Social Security program.

What are FICA Taxes?

When the tax provisioning portion of the Social Security Act – Title VIII – was taken out of the program in 1939, it was placed into the Internal Revenue Tax code.   At that time, a more descriptive name than Title VIII was needed, so the tax was renamed as the Federal Insurance Contributions Act or simply FICA.  To this day, FICA remains the tax collection mechanism for Social Security.

FICA Tax Rates

FICA is used to provide for the federal system of old age, survivors, disability and hospital insurance.  The first three of these are funded by the Social Security system, while hospital insurance is funded by a Medicare tax.  Both employees and employers are required to contribute to FICA taxes through regular payroll deductions.  The good news is that there is a limit to the amount of FICA taxes an employee is required to pay.

Generally, FICA taxes are collected at a rate of 7.65% on gross earnings – earnings before any deductions. The breakdown of FICA is 6.2% for Social Security (Old-Age, Survivors, and Disability Insurance or OASDI) and 1.45% for Medicare.  The following table shows the FICA limits for 2005 through 2011:

2011 FICA Tax and Social Security Limits

• FICA Tax Rate = 7.65% for employers (see note below)
• FICA Tax Rate = 5.65% for employees (see note below)
• Social Security Limit = $106,800
• Maximum Social Security Contribution = $6,621.60 (employer) / $4485.60 (employee)

Note:  In 2011, the FICA tax rate for employees was lowered to 5.65%.  The employer tax rate remained unchanged, while the Social Security rate for employees was lowered to 4.20%.