Track payroll taxes and deductions.

You will see other taxes and deductions on your paycheck in addition to federal, state and local income taxes. Some will have tax implications.

  • The Federal Insurance Contributions Act (FICA) requires that you pay into two social programs: Social Security and Medicare.
    • Social Security taxes are paid to the federal government to assist elderly, disabled and survivors/dependents of workers. Almost everyone pays into Social Security. Exceptions include some employees who work for state or local government agencies, school districts or colleges who pay into a separate pension program. Other exceptions exist for qualifying religious groups, foreign workers or students, and some student employees of schools Links to an external site.. Assume you will pay Social Security unless informed otherwise. In 2018, you will pay Social Security taxes at a rate of 6.2 percent based on your earnings up to a limit of $128,400. Your employer pays the same 6.2 percent on your earnings.
    • Medicare taxes are paid to the federal government to provide basic health insurance for people 65 or older. It is different from Medicaid, which provides health care for low income, disabled or low-resource individuals. Most people pay into Medicare. Consult with your human resources department to understand what part of your wages are subject to Medicare taxes. In 2020, Medicare taxes are 1.45 percent of your earnings. Your employer pays the same 1.45 percent on your earnings. You and your employer will pay additional Medicare taxes Links to an external site. if your income exceeds a certain limit.
  • Health insurance premiums are taken out of your paycheck if your employer offers a health care benefit. Premiums include medical, dental or vision coverage. Your company will set your premium amount according to the policies they negotiate with insurance providers. Most often, these group coverage premiums are pretax deductions, meaning premiums are deducted from your gross pay before taxes are calculated.
  • Health Savings Account (HSA), Medical Savings Account (MSA) and Flexible Spending Account (FSA) are set up to reimburse you for qualified medical/dental Links to an external site. and child/dependent care Links to an external site. costs. Reimbursements or payments from the accounts are not taxed.
  • Employer-sponsored retirement plans, like 401(k), 403(b) or 457 plans are tax-deferred retirement options. All taxes are deferred until you withdraw the money at age 59½ or older. Your employer may contribute matching funds, which are taxed only when they are withdrawn. Withdrawals taken from your retirement accounts prior to age 59½ are taxed and you may incur a penalty for early withdrawal.
  • Short- or long-term disability and other insurances are offered free or at a reduced cost through your employer. Premiums you pay for additional coverages may be taxable.

If you have a question about amounts on your paycheck, you should consult with your human resources department for a detailed explanation.

 


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