Two taxes, two ceilings
FICA is not one tax. The 6.2% line funds Old-Age, Survivors, and Disability Insurance, and it stops at the taxable maximum — $192,300 in 2027. The 1.45% line funds Hospital Insurance, Medicare Part A, and it never stops. Above the base, the marginal payroll tax rate drops from 7.65% to 1.45% on every additional dollar.
Employers match both. A worker at the base in 2027 generates $11,922.60 in OASDI and $2,788.35 in HI, for $14,710.95 in employee tax and an identical employer amount. Above that wage level the OASDI side freezes while the HI side keeps climbing.
| Tax | Employee | Employer | Self-employed | 2027 cap |
|---|---|---|---|---|
| OASDI | 6.2% | 6.2% | 12.4% | $192,300 |
| HI | 1.45% | 1.45% | 2.9% | None |
| Additional Medicare | 0.9% | Not matched | 0.9% | Above $200k / $250k |
| Combined | 7.65% | 7.65% | 15.3% | Base-limited in part |
Reading the W-2
Box 3 shows Social Security wages, capped at the base. Box 5 shows Medicare wages and tips, uncapped. For anyone earning above $192,300 in 2027, the two boxes differ by exactly the excess, and that difference is not a payroll error.
Box 4 is 6.2% of box 3 and box 6 is 1.45% of box 5. If box 4 does not equal 6.2% of box 3, something is wrong: either multiple employers withheld in aggregate above the cap, in which case the excess is claimed as a credit on the return, or a Section 3121 deferral applied.
The self-employed version
Schedule SE applies 12.4% and 2.9% to net self-employment earnings after the 92.35% adjustment, with the 12.4% portion capped at the wage base and the 2.9% portion uncapped. A self-employed worker with $250,000 of net earnings in 2027 pays OASDI on $192,300 only, but HI on the full amount.
Half of the combined tax is deductible above the line, which offsets part of the 15.3% headline. The additional 0.9% is not deductible and is not matched by anyone.
The effective rate falls sharply at the top, and this is worth stating plainly. A worker earning $500,000 in 2027 pays 1.45% on the portion above $192,300, not 7.65%. Marginal and average rates diverge completely once the ceiling is crossed, and a payroll projection that applies 7.65% to total salary overstates the tax by a wide margin.
The employer’s share behaves identically, which is why payroll cost per dollar of salary also declines above the base. The correct budget method is 7.65% on the first $192,300 and 1.45% on everything above it, with the 0.9% additional tax layered on where the filing threshold is met.
Why the split is structural
The two taxes fund separate trust funds with separate actuarial projections, so they cannot be merged without changing the accounting. OASDI faces a projected reserve depletion in Q4 2032 at 78% payable; HI faces Q2 2033 at 89%. Different rates, different ceilings, different finances — but they arrive on the same stub, which is why the distinction is routinely lost.