Quick Read: Social Security and Medicare Taxes Explained

Both the Social Security tax and the Medicare tax consist of two parts — an employee’s portion and an employer’s portion. Employers are required to withhold the employee’s portion of both taxes from the employee’s taxable wages and to pay a matching amount as the employer’s portion. Unless an employer pays employee’s tips, the employer’s portion will be the same amount as that withheld from the employee’s wages.

Both taxes are imposed at flat rates: 6.2% for the Social Security tax and 1.45% for the Medicare tax. Therefore employers are responsible for paying a total Social Security tax of 12.4% and a Medicare tax of 2.9% on each separate taxable wage payment made to employees. Employers must withhold Social Security and Medicare taxes regardless of the number of allowances an employee claims for withholding tax purposes. However, Social Security taxes are only imposed on taxable wages up to a certain amount, which is called the Social Security Wage Base. Social Security Wage Base, which is adjusted upward each year based on average national wages, is $113,700 for 2013. The Medicare tax has no wage base limit and is imposed on all taxable wages.