Employer FICA Tax in 2027: Rates, Wage Base, and How to Lower It Legally

What Is Employer FICA Tax?

Employer FICA tax is the employer’s share of Social Security and Medicare tax: 6.2% Social Security tax on wages up to the wage base, plus 1.45% Medicare tax on all wages, for 7.65% in total. Employees pay the same amounts through withholding.

What Is the Social Security Wage Base for 2027?

The Social Security wage base for 2027 is $192,300, up from $184,500 in 2026. After an employee’s wages for the year pass that amount, neither you nor the employee pays more Social Security tax on that employee’s pay.

The Social Security Administration announced the new base on October 14, 2026. Medicare tax does not stop at the wage base. In most hourly workforces, few employees reach $192,300, so the full 7.65% applies to almost all of your payroll. For the other 2027 figures, see our 2027 employee benefit limits.

Who Pays the Additional Medicare Tax?

Only the employee. You must withhold an extra 0.9% Medicare tax from an employee’s wages above $200,000 in a calendar year, but there is no employer match. Your own Medicare rate stays at 1.45%.

Withholding starts in the pay period in which the employee’s wages from you pass $200,000, and it continues to the end of the year. The threshold is the same for every employee, whatever their filing status.

What Is the FUTA Tax Rate?

The FUTA tax rate is 6.0% on the first $7,000 of each employee’s wages. Employers that pay state unemployment tax on time get a credit of up to 5.4%, so the usual rate is 0.6%, or $42 per employee per year.

If your state borrowed from the federal government to pay unemployment benefits and did not repay the loan, the credit is reduced and you pay more. The Department of Labor sets the final list of credit reduction states after November 10 each year. For 2026, its list of possible credit reduction states named California (at least 1.5%, or $105 more per employee) and the U.S. Virgin Islands (4.8%). Employers in credit reduction states report the extra tax on Schedule A of Form 940.

What About State Unemployment Tax (SUTA)?

Every state also charges employers a state unemployment tax. Each state sets its own wage base and rates. New employers usually pay a standard new-employer rate, and later rates depend on how many former employees claimed benefits.

Some states also have other payroll taxes, such as paid family leave or disability insurance. States also decide whether pre-tax Section 125 deductions count as wages for SUTA, so check your state’s rules or ask your payroll provider.

When Do Employers Deposit Payroll Taxes?

It depends on your lookback period. If you reported $50,000 or less of employment taxes in that period, you deposit monthly, by the 15th of the next month. If you reported more, you deposit semiweekly. All deposits must be made electronically.

• Lookback period: For Form 941 filers, the lookback period for 2027 is July 1, 2025, through June 30, 2026.
• Semiweekly: Taxes for Wednesday, Thursday or Friday paydays are due the next Wednesday. Taxes for Saturday through Tuesday paydays are due the next Friday.
• $100,000 rule: If you build up $100,000 or more of tax on any day, deposit it by the next business day, on either schedule.
• Small employers: If your tax for a quarter is less than $2,500, you can usually pay it with your timely filed Form 941.
• FUTA: Deposit FUTA tax once the amount you owe is more than $500. Smaller amounts carry forward to the next quarter.

How Do Section 125 Deductions Lower Employer FICA?

Pre-tax deductions for qualified benefits under a Section 125 cafeteria plan are not wages for Social Security, Medicare or FUTA tax. For each dollar an employee pays pre-tax, the employer saves 7.65% in FICA tax, and the employee saves FICA and income tax.

• What counts: Employee health, dental and vision premiums, health FSA and dependent care FSA contributions, HSA contributions made through the plan, and other qualified benefits.
• What does not: Employee 401(k) deferrals. They lower income tax, but they are still wages for Social Security and Medicare tax.
• Overtime and tips: The new deductions for qualified overtime and tips lower the employee’s income tax only. FICA still applies. See what employers must report for overtime and tips. Food, beverage and some beauty businesses can claim the FICA tip credit for employer FICA on tips.
• Above the wage base: For pay above $192,300, a pre-tax dollar saves only the 1.45% Medicare tax.

Worked Example: A 50-Employee Company

Take a company with 50 employees who each earn $35,000 a year. All of them are below the wage base, so each pre-tax dollar saves the full 7.65%.

• FICA wages: 50 × $35,000 = $1,750,000 a year
• Employer FICA: $1,750,000 × 7.65% = $133,875 a year
• Now 25 of them pay $150 a month in health premiums pre-tax: 25 × $150 × 12 = $45,000 out of FICA wages
• Employer FICA savings: $45,000 × 7.65% = about $3,440 a year

That is what a premium-only setup saves. It only counts employees on the health plan. A full Section 125 savings plan includes every employee and adds pre-tax benefits, so the savings apply across the whole workforce. Most employers save $650–$850 per employee per year. For 50 employees, that range is about $32,500–$42,500 a year. Your result depends on your payroll. Run your own numbers in the Section 125 savings calculator.

Our program requires at least 50 employees and works alongside your existing health insurance. There is no setup fee and no minimum contract; the per-employee monthly fee is paid from the tax savings. It is not available to businesses located only in certain states; see state availability. For the full picture, read how Section 125 cuts FICA tax and our Section 125 cafeteria plan guide.

Frequently Asked Questions

What is the employer FICA tax rate for 2027?

The employer FICA rate for 2027 is 7.65%: 6.2% Social Security tax on wages up to $192,300, plus 1.45% Medicare tax on all wages. Employees pay the same rates through withholding.

Do employers pay the 0.9% Additional Medicare tax?

No. The 0.9% Additional Medicare tax is paid only by the employee. Employers must withhold it from wages above $200,000 in a calendar year, but there is no employer match.

What is the FUTA tax rate for 2027?

FUTA is 6.0% on the first $7,000 of each employee’s wages. With the full 5.4% state credit, the rate is 0.6%, or $42 per employee. Employers in credit reduction states pay more.

Do 401(k) contributions reduce employer FICA tax?

No. Employee 401(k) deferrals lower income tax, but they are still wages for Social Security and Medicare tax. Pre-tax benefits under a Section 125 plan, such as health premiums and FSAs, do reduce FICA wages.

How much can a Section 125 plan save on employer payroll taxes?

The employer saves 7.65% of every pre-tax dollar employees put into the plan, up to the wage base. With our full Section 125 savings plan, most employers save $650–$850 per employee per year.

Sources

The rules and figures on this page come from these sources.

• Employer FICA tax: 26 U.S.C. § 3111
• Employee FICA and Additional Medicare Tax: 26 U.S.C. § 3101
• FUTA tax: 26 U.S.C. § 3301
• Rates, wage bases and deposits: IRS Publication 15
• Social Security wage base: SSA contribution and benefit base
• Cafeteria plan FICA exclusion: 26 U.S.C. § 3121(a)(5)(G)