"Payroll taxes" covers two different things: taxes you withhold from an employee's pay and pass on, and taxes you pay yourself on top of their wages. This post is about the second kind, the employer's cost. If you want to know how to work out what to withhold from a paycheck, our guide on how to calculate payroll taxes covers that side.
How much are payroll taxes for an employer?
For most small employers the federal part comes to 7.65% of wages, plus at most $42 a year per employee in FUTA. State unemployment tax is the variable piece.
| Tax | Employer rate | Wages it applies to | Also withheld from the employee? |
|---|---|---|---|
| Social Security | 6.2% | Up to $184,500 per employee in 2026 | Yes, another 6.2% |
| Medicare | 1.45% | All wages, no cap | Yes, another 1.45% |
| Additional Medicare Tax | None | Wages over $200,000 | Yes, 0.9%; no employer match |
| FUTA (federal unemployment) | 6.0%, usually 0.6% after the state credit | First $7,000 per employee per year | No |
| SUTA (state unemployment) | Set by your state, often a new-employer rate at first | Up to the state's wage base | Usually not; check your state |
| Federal, state and local income tax | None | — | Yes, from the W-4 and state forms |
A worked example: one employee on $40,000
Say you pay one employee $40,000 in 2026 and you pay your state unemployment tax in full and on time, so you get the full FUTA credit.
| Tax | Calculation | Employer cost |
|---|---|---|
| Social Security | $40,000 × 6.2% | $2,480 |
| Medicare | $40,000 × 1.45% | $580 |
| FUTA | $7,000 × 0.6% | $42 |
| Federal total | $3,102 | |
| SUTA | Your state rate × the state wage base | Varies |
So the federal cost is about 7.76% of this employee's wages. The employee's own 7.65% ($3,060) and their income tax are withheld from their pay; they reduce take-home pay, not your profit. Workers' compensation insurance, benefits and paid leave are real costs too, but they are not payroll taxes.
Why FUTA is usually 0.6%
The FUTA rate is 6.0% on the first $7,000 of each employee's wages. The IRS gives a credit of up to 5.4% for state unemployment tax, which leaves a net rate of 0.6%. You only get the full credit if you paid your state unemployment tax in full by the Form 940 due date.
In a credit reduction state, the credit is smaller and FUTA is higher. These are states that borrowed from the federal unemployment fund and haven't repaid it. The Department of Labor announces them after 10 November each year, so the list for 2026 wages isn't final until mid-November 2026. Our post on Form 940 and FUTA covers the return itself.
State unemployment tax (SUTA)
Every state runs its own unemployment insurance tax, and each one sets its own wage base and rates. New employers usually start on a standard new-employer rate; later the rate moves with your history of claims. Your state workforce agency sends you the rate when you register, and that notice is the number to use.
How the cost changes with pay
Because FUTA stops at $7,000 and Social Security stops at $184,500, the federal employer cost isn't a flat percentage at every wage. It is close to 7.65% for most staff, slightly higher for low earners (the $42 of FUTA weighs more) and lower above the Social Security wage base, where only Medicare continues.
| Annual wages | Social Security (6.2%) | Medicare (1.45%) | FUTA (0.6% of $7,000) | Federal total |
|---|---|---|---|---|
| $20,000 | $1,240 | $290 | $42 | $1,572 |
| $40,000 | $2,480 | $580 | $42 | $3,102 |
| $60,000 | $3,720 | $870 | $42 | $4,632 |
| $190,000 | $11,439 (on $184,500) | $2,755 | $42 | $14,236 |
Add your state unemployment tax on top, at the rate on your state's notice. If you hire part-way through the year, the same caps apply to the wages you actually pay that employee in the year.
When the taxes are paid
- Social Security, Medicare and withheld income tax: deposited together on a monthly or semiweekly schedule, set by your lookback-period total ($50,000 is the dividing line), and reported each quarter on Form 941.
- FUTA: deposited each quarter once the amount owed passes $500, otherwise carried forward; reported once a year on Form 940.
- SUTA: paid to the state, usually quarterly, with the state's wage report.
- Household employers (nannies, caregivers) pay the federal taxes with their own return on Schedule H instead.
Where PayDocs fits
PayDocs doesn't pay or file payroll taxes. It makes the pay stub your employee receives, showing their gross pay, each amount withheld and their net pay, from your figures. PayDocs works out federal income tax, Social Security, Medicare and supported state taxes for 2026 pay dates (see what we calculate). Our free paycheck calculator shows the employee side for your state before you run payroll.
This is general information about US federal rules as of 7 October 2026, not tax or legal advice. State rules add to it; check your state's labor and revenue departments.
Questions
How much are payroll taxes for an employer in 2026?
7.65% of wages for Social Security and Medicare (Social Security stops above $184,500), plus FUTA of usually 0.6% of the first $7,000 per employee, plus state unemployment tax at your state's rate.
Do employers pay the Additional Medicare Tax?
No. You must withhold the 0.9% Additional Medicare Tax from an employee's wages once they pass $200,000 in the calendar year, but the IRS says there is no employer match, so it costs you nothing extra.
Is FUTA 6% or 0.6%?
The rate is 6.0% on the first $7,000, but most employers get a 5.4% credit for paying state unemployment tax, leaving 0.6%, or $42 per employee a year. In a credit reduction state the credit is smaller.
Does the employer pay the employee's income tax?
No. You withhold federal and any state income tax from the employee's pay and send it in, but it is the employee's tax. Your own costs are your share of Social Security and Medicare and the unemployment taxes.
Sources
- IRS: Publication 15 (2026), Employer's Tax Guide
- IRS: Topic 751, Social Security and Medicare withholding rates
- IRS: Topic 560, Additional Medicare Tax
- IRS: Topic 759, Form 940 deposit requirements (FUTA)
- IRS: FUTA credit reduction
Sources checked October 7, 2026. This article explains how pay documents work; it is not tax or legal advice.
