The employee's portion of the Social Security tax, which is withheld from employees salary and wages during 2011, will be 4.2% of the first $106,800 of each employee's taxable earnings. (The employee withholding rate of 4.2% is two percentage points lower than the 2010 rate of 6.2%.) Each employee's earnings in excess of $106,800 are not subject to the Social Security tax.

The employer's portion of the Social Security tax in 2011 remains at 6.2% of each employee's first $106,800 of taxable earnings. There is no employer Social Security tax on any employee's earnings above $106,800 during 2011.

In addition to the Social Security tax, the employee must have withholdings for the Medicare tax of 1.45% of every dollar of salary or wages. The employer must also pay a Medicare tax of 1.45% on every dollar of every employee's salary or wages. Hence, the combined Medicare tax for 2011 remains at 2.9% on all employees' earnings.

Self-employed individuals are responsible for paying both the employee and the employer portions of the Social Security tax and the Medicare tax.

To learn more, see the Related Topics listed below: