The Federal Insurance Contributions Act calculates the maximum wage base for Social Security tax each year with a cost-of-living adjustment based on the Consumer Price Index, reports the Social Security Administration. For 2015, the cost-of-living adjustment is 1.7 percent, making the maximum wage base $118,500.Continue Reading
The FICA tax includes taxes for both Social Security and Medicare, according to About.com. Typically, employers and employees each pay half the cost of FICA taxes, which amount to 15.3 percent of earnings as of 2015. The taxes break down to 12.4 percent for Social Security and 2.9 percent for Medicare. Self-employed people must pay both the employee and employer's portions of FICA taxes, but half the amount is deductible as a business expense, reports CNN Money. Once taxpayers' earnings go over the Social Security maximum wage base, they owe no more Social Security taxes on the additional income.
Unlike Social Security taxes, Medicare taxes have no wage base limit, states the IRS. Taxpayers continue to pay Medicare taxes no matter how much they earn. Additionally, beginning with the tax year 2013, when their income is over the threshold amount of $200,000 a year, or $250,000 for married couples filing jointly, employees must pay an extra Medicare tax of .9 percent of income. Employers do not have to match this sum.Learn more about Taxes