What is the employer's Social Security tax rate for 2017?
The employer's Social Security tax rate for 2017 is 6.2% which is multiplied times each employee's taxable compensation (wages, salaries, bonuses, commissions, etc.) However, if an employee is paid more than $127,200 during 2017, the amount that is greater than $127,200 is not subject to the Social Security tax. Hence, the $127,200 is referred to as an annual contribution limit, wage base, earnings limit, ceiling, and others.
The 6.2% rate for the Social Security tax is the same percentage as it has been for many years. However, the 2017 annual earnings limit of $127,200 is an increase from the 2016 limit of $118,500. Therefore, in 2017 the maximum Social Security tax expense that an employer will have for an individual employee is $7,886.40 (6.2% X $127,200).
It is important to note that an employer also has a Medicare tax expense equal to 1.45% times every dollar of taxable compensation. In other words, there is no earnings limit for the Medicare tax of 1.45%.
The combination of the employer's expense of the 6.2% Social Security tax and the 1.45% Medicare tax is commonly known as the employer's 7.65% FICA tax expense. Hence, in 2017 an employer's FICA tax expense will be 7.65% on each employee's taxable compensation up to $127,200 and then 1.45% on the taxable compensation that is in excess of $127,200.
Since employees must also pay a 6.2% Social Security tax and a 1.45% Medicare tax through payroll withholdings, the employer's Social Security tax and Medicare tax is sometimes referred to as the employer's matching of these expenses. This results in the employer remitting to the government both the employee and the employer portions of the taxes: Social Security taxes of 12.4% (6.2% + 6.2%) plus Medicare taxes of 2.9% (1.45% + 1.45%) for a total FICA tax remittance of 15.3% (7.65% + 7.65%).
You can find more details for these taxes (and also the Medicare surtax that is paid by high income self-employed individuals and by employees) on the free website www.irs.gov.