payroll tax
The tax on wages that funds Social Security and Medicare.
Social Security and Medicare contributions levied on wages, distinct from income tax.
What that means in practice
It is separate from income tax and works differently. There are no brackets and no standard deduction — it starts on the first dollar of wages. Social Security stops at a ceiling each year; Medicare does not stop at all. Employers pay a matching share you never see on your payslip.
Payroll tax applies to wages from the first dollar with no deduction, at fixed rates matched by the employer. ⚠️ The Social Security component ceases above an annually indexed wage base, making it regressive above that point; the Medicare component is uncapped and carries an additional levy above a filing-status threshold. Its incidence is generally understood to fall on the employee regardless of statutory split.
Questions people ask
Does this change depending on which state I live in?
No — payroll taxes are federal. payroll tax works the same in every state. It is one of the few parts of a paycheck that does not move when you do. That is why comparing take-home between states isolates the state layer so cleanly.
Do I need to understand other terms before this one makes sense?
This one does not stand alone. Several related terms are linked below. payroll tax is easier to hold once they are in place.
I have seen this called something else. Is it the same thing?
Very likely the same rule. Several names point at payroll tax, depending on whether you met it on a form, from an employer or in the news.
Is this determined federally or by jurisdiction?
Payroll taxes are levied under federal law and apply uniformly across jurisdictions. Rates and thresholds are set by statute and adjusted annually where indexed. State income tax is separate and additive; it does not modify the payroll computation.
What conceptual dependencies does this term carry?
This term has multiple conceptual dependencies, enumerated in the related-terms list. Definitions in tax law are frequently mutually referential — a provision's meaning depends on defined terms elsewhere in the code — so isolated reading commonly produces error.
What alternative designations refer to this concept?
This concept is referred to by multiple designations across statutory text, agency guidance, payroll documentation and common usage. The alternatives are enumerated on this page. ⚠️ Terminology divergence is a frequent source of error where a statutory term and its colloquial equivalent are not exactly co-extensive.