Payroll taxes: what employers and employees pay in 2026

Employer payroll taxes vs employee payroll taxes

Payroll tax is two bills that travel together. One part comes out of the employee's paycheck: you withhold it and send it in. The other part is yours: you pay it on top of wages, and it never shows on the employee's pay stub as a deduction.

Social Security and Medicare together are called FICA. The employer half is 7.65% of pay up to the Social Security wage base and 1.45% above it. The employee pays a matching 7.65%, plus 0.9% Additional Medicare on pay over $200,000, which the employer withholds but does not match.

State taxes follow the same split. State unemployment tax (SUTA) is almost always an employer cost. State income tax, and most state disability and paid leave premiums, come out of the employee's check. The state rows are below.

2026 federal rates, wage bases and what changes in 2027

Social Security wage base

$184,5002026; $192,300 in 2027 (SSA, Oct 14, 2026)

Employer FICA

7.65%6.2% + 1.45% up to the wage base

FUTA, net

$42 per employee0.6% of the first $7,000

Additional Medicare

0.9% over $200,000employee only

Social Security stops at the wage base. Once an employee has earned $184,500 in 2026, neither of you pays more Social Security that year. The maximum employer Social Security cost per employee is $11,439 ($184,500 x 6.2%). The SSA has already set the 2027 base at $192,300, so the cap rises by $7,800 of wages next year.

FUTA is 6.0% on paper and 0.6% in practice. You get a credit of up to 5.4% for paying your state unemployment tax on time, which leaves 0.6% on the first $7,000, or $42 per employee per year ($7,000 x 0.6%).

Rates by state, with each state agency's figure, are on our 2026 payroll tax rates table.

State payroll taxes: SUTA, income tax, disability and paid leave

State unemployment tax (SUTA). Every state charges it, usually to the employer only, on a wage base the state sets. New employers get a fixed starting rate. After a few years the rate moves with your layoff history.

All 50 states and DC, with lowest and highest rates, are in our 2026 SUTA rates by state table. The payroll tax hub links every state page.

State income tax withholding. Nine states have no state income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Everywhere else you register for a withholding account and withhold from each check using the state's form (Arizona's Form A-4, for example, lets the employee pick 0.5% to 3.5%, according to Bloomberg Tax, a secondary source).

Disability and paid leave programs. These are the state taxes most guides skip, and several now have an employer share:

Local payroll taxes: city, county and school district

In some states, cities, counties or school districts also tax wages. Where they do, you withhold them like state tax and file with a separate agency. The ones that catch new employers:

San Francisco does not tax wages but measures part of its business taxes by payroll; see the San Francisco payroll expense tax page.

Worked example: payroll taxes on a $50,000 and a $200,000 employee

Here is what the employer owes in a year on one employee in Texas (no state income tax, SUTA new employer rate 2.70% on $9,000) and California (SUTA 3.4% plus 0.1% ETT on $7,000). Both use 2026 federal rates.

The math: $50,000 x 6.2% = $3,100; $50,000 x 1.45% = $725; $7,000 x 0.6% = $42; $9,000 x 2.70% = $243 in Texas; $7,000 x 3.4% = $238 and $7,000 x 0.1% = $7 in California. For $200,000, Social Security stops at $184,500 x 6.2% = $11,439, and Medicare is $200,000 x 1.45% = $2,900.

The share of wages falls at higher pay because Social Security, FUTA and SUTA all stop at a wage base. If California ends up with a 1.5% FUTA credit reduction for 2026, add $105 to both California columns.

What the employee pays. The $50,000 employee has $3,825 withheld for FICA ($3,100 + $725), plus federal income tax per their W-4. In California they also pay SDI of $650 ($50,000 x 1.3%). The $200,000 employee has $14,339 withheld for FICA and, in California, $2,600 of SDI, because SDI has no wage cap. Additional Medicare applies only to pay above $200,000, so it is $0 here; at $250,000 it would be $450 ($50,000 x 0.9%).

To add workers’ comp, benefits and your payroll software fee, use the employee cost calculator.

How to figure payroll taxes each pay period

1. Start with gross pay for the period. A $50,000 salary paid biweekly is $1,923.08 a check ($50,000 / 26).
2. Withhold the employee’s FICA. Social Security $119.23 (6.2%) and Medicare $27.88 (1.45%), $147.11 in all.
3. Withhold income tax. Federal from the employee’s Form W-4 using the IRS tables in Publication 15, and state from the state form and tables. Add local tax if the employee lives or works in a taxing city.
4. Add your employer match. Another $147.11 of FICA on that check.
5. Add FUTA and SUTA until each wage base is used up. On this employee, FUTA stops partway through the 4th paycheck (when year-to-date pay passes $7,000) and Texas SUTA partway through the 5th (past $9,000). On a $200,000 salary, Social Security stops on the 24th of 26 checks.
6. Track year-to-date wages per employee. Wage bases are per employee per employer per calendar year, so they restart on January 1.

Payroll software does steps 2 to 6 for you. Doing it by hand is possible with one or two salaried employees; it gets error-prone with hourly pay, bonuses and multiple states. Our guide to setting up payroll covers the whole process, and our payroll software rankings compare the tools that file for you.

When to deposit payroll taxes

You do not send federal payroll tax with each paycheck by default. Your deposit schedule depends on how much tax you reported in a lookback period (July 1 two years back to June 30 last year; for 2026 that is July 1, 2024 to June 30, 2025).

The tax you deposit is both halves: what you withheld from employees and your own share. State withholding and SUTA have their own schedules, usually monthly or quarterly deposits with quarterly wage reports.

Payroll tax filing deadlines for the rest of 2026 and 2027

Year-end steps (W-2 corrections, 1099s, the 940) are in our payroll year-end checklist.

Penalties, and who pays when the payroll company gets it wrong

Late deposits draw an IRS failure-to-deposit penalty that grows with the number of days late, plus interest. Late or wrong quarterly state wage reports can raise your state unemployment rate: one employer on Hacker News said their rate "went from 0.8% to 12.75%" after a provider switch went wrong (Aug 2026).

The most common complaint we found about payroll companies is tax filing errors with the penalty left on the customer. Each provider’s written promise is narrower than its marketing:

None of them cover the tax itself, or errors that start with wrong data you entered. Read the full comparison in our payroll compliance guide.

Common payroll tax mistakes

• Budgeting only the salary. In our Texas and California examples, employer FICA, FUTA and SUTA alone came to 7.31% to 8.22% of pay, before workers’ comp and benefits.
• Treating a worker as a contractor. If the IRS reclassifies them, you owe the employment taxes you skipped. See W-2 vs 1099 rules.
• Missing a state program. A new paid leave tax (Minnesota in 2026, Maryland in 2027) needs its own account and quarterly report.
• Not registering where remote employees live. Withholding and SUTA usually follow the work location, not your office.
• Forgetting local taxes. Pennsylvania and Ohio employers often learn about local earned income tax from a notice.
• Using the wrong SUTA rate after the new employer period. States mail a new rate each year; load it into your payroll system before the first payroll of January.

More errors and fixes are in the payroll mistakes guide.