Payroll tax rates affect the amounts in every payroll journal entry you post. Here are the 2026 rates every bookkeeper needs to know.
2026 payroll tax rates at a glance
| Tax | Employee Rate | Employer Rate | Wage Base / Cap |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | $176,100 (2026) |
| Medicare | 1.45% | 1.45% | No cap |
| Additional Medicare Tax | 0.9% | None | Over $200K (single) / $250K (married) |
| FUTA | None | 0.6% (after credit) | First $7,000 per employee |
| SUTA | Varies | Varies by state/rate | Varies by state |
The Social Security wage base: why it matters mid-year
Once an employee's year-to-date wages hit $176,100, Social Security withholding stops — for both employee and employer. This affects your journal entry amounts starting with the pay period that crosses the cap.
Example: A $20,000/month salaried employee hits the cap in September (month 9). From September onward, the SS lines in the journal entry drop to $0 for that employee, and the Payroll Tax Expense decreases accordingly.
FUTA: the $7,000 per-employee cap
FUTA is 0.6% on the first $7,000 of each employee's wages per year (most employers receive the full 5.4% SUTA credit against the 6% gross FUTA rate). Once each employee earns $7,000, FUTA stops for that employee for the year. Most employees hit this cap in Q1 for businesses with average wages above ~$15/hour.
Additional Medicare Tax: who pays it
Employees earning over $200,000 (single filers) owe an additional 0.9% Medicare Tax. Employers are required to withhold this once an employee's YTD wages exceed $200,000 — regardless of the employee's filing status. The employer does NOT pay the additional 0.9% (it's employee-only).
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