The Social Security Administration has released the 2026 Social Security wage base, and employers should begin preparing now for the impact on payroll budgeting, withholding and compliance. Understanding these adjustments now can help employers prepare for a smooth transition.
Understanding Federal Insurance Contributions Act (FICA) Taxes
Under the FICA, employers are responsible for withholding and remitting two federal payroll taxes: the Social Security tax and the Medicare tax. Together, these taxes total 15.3% of wages, split evenly between employer and employee, which includes 12.4% for Social Security and 2.9% for Medicare.
- Social Security tax- 6.2% paid by the employer and 6.2% paid by the employee.
- Medicare tax- 1.45% paid by the employer and 1.45% paid by the employee.
While Medicare tax applies to all wages, Social Security tax applies only up to the Social Security wage base.
Social Security Wage Base
For 2026, the Social Security wage base will rise to $184,500, up from $176,100 in 2025. This means employers must withhold Social Security tax on employee wages up to this new threshold.
For employers, the increase translates into a higher maximum Social Security tax liability per employee. In 2026, the maximum employer portion will be $11,439 per employee. This change is particularly relevant for organizations with high‑earning employees, as it may increase total payroll tax expenses for the year.
Medicare Tax
In addition to standard FICA taxes, higher‑earning employees may be subject to the additional 0.9% Medicare tax. Although employers do not pay this tax, they are responsible for withholding it.
The rules are straightforward:
- Employers must begin withholding an additional 0.9% once an employee’s wages exceed $200,000 in a calendar year.
- Withholding is based solely on wages paid by your organization, not on the employee’s total household income or wages from other employers.
- Employees reconcile their actual liability when they file their income tax return.
This makes it essential for payroll systems to track cumulative wages accurately throughout the year.
What Employers Should Do Now
Now that we are in 2026, employers need to ensure their payroll systems are up to date with the new Social Security wage base and communicate upcoming changes to employees. For organizations looking to streamline this process, we offer comprehensive tax withholding always updated to the latest wage base, federal, state and local tax laws, ensuring your business remains fully compliant. To learn more about our tax compliance services, contact us today.
