Payroll taxes fund Social Security and Medicare, and they appear on every employee paycheck under the acronym FICA (Federal Insurance Contributions Act) — the self-employed pay the same thing called Self-Employment tax. The single number that matters most for 2026 planning is the Social Security wage base, which the Social Security Administration announces each November after indexing it to the prior year's average covered wages. (Social Security Administration)
The 2026 Social Security wage base
For 2026, the wage base is $184,500, up from $176,100 in 2025 — a meaningful jump that reflects how the base has tracked inflation and wage growth. A few things to keep straight when you look at it: (Social Security Administration)
- Wages up to $184,500 are taxed at 6.2% on the employee side, with the employer paying a matching 6.2%. An employee who earns exactly the base therefore pays $11,439 in Social Security tax, and the employer adds another $11,439 on top.
- Self-employed individuals carry both halves: 12.4% on net earnings up to the base. That is why the SE-tax worksheet on Schedule SE uses 12.4% and 2.9% rather than the split 6.2/1.45 you see on a W-2.
- The moment covered wages exceed $184,500, the Social Security tax stops entirely. Only Medicare keeps accruing, which is why the extra pay above the base costs you far less in FICA.
This base is the ceiling, not the floor. Wages below it are fully taxed, so most full-time employees never actually hit it — that is the trap a lot of people miss when they first see the number. (Social Security Administration)
Medicare has no ceiling
Medicare's 1.45% (employee) plus 1.45% (employer), or 2.9% combined for the self-employed, applies to all covered wages with no maximum. On top of that, the Additional Medicare Tax of 0.9% kicks in once wages exceed a threshold that depends on filing status: (Internal Revenue Service)
- $200,000 for single filers
- $250,000 for married filing jointly
- $125,000 for married filing separately
Two details matter in practice. First, the employer's withholding rule is blunt: once an employee's wages in a single calendar year cross $200,000, the employer starts withholding the 0.9% even if that person files as part of a joint return. A lower-income spouse filing separately does not "share" the headroom. Second, there is no employer matching contribution on the 0.9% surtax — it is borne entirely by the employee. (Social Security Administration)
Self-employed: the 15.3% rate
A self-employed person pays the full combined rate. On net earnings up to the base that is 15.3% (12.4% Social Security + 2.9% Medicare); above the base it falls to 2.9%, or 3.8% once the Additional Medicare Tax applies. You get to deduct half of the SE tax as an above-the-line adjustment on Form 1040, which is the only real comfort on the self-employed side of the ledger. (Social Security Administration)
Where Medicaid actually fits
It is worth separating the pieces out, because the title of this article groups them together but the funding is completely different. Social Security and Medicare are funded by the FICA/SE payroll taxes above. Medicaid — the means-tested program that pays for health coverage for low-income adults, children, pregnant people, and people with disabilities — is not financed by any payroll tax on wages. It is paid for from a blend of general federal and state revenues, and each state administers its own eligibility rules and benefit levels. So there is no "Medicaid tax base" to look for on a pay stub; if your question was really "how does the government get the money to run Medicaid," the answer is general revenues, not a FICA line item. (Social Security Administration)
A quick math example: a high earner
Say an employee takes home $300,000 in 2026 wages. The FICA picture looks like this: (Social Security Administration)
- Social Security: 6.2% of $184,500 = $11,439, then nothing more above the base.
- Medicare: 1.45% of $300,000 = $4,350, plus 0.9% on the $100,000 that sits above $200,000 = $900.
- Total employee FICA: $16,689. The employer adds a matching $15,789 (the same Social Security and base Medicare, but no match on the surtax).
For a self-employed person with the same net income, the combined burden is steeper because you pay both sides. The planning point here is not to "dodge" FICA — there are no clean ways to — but to understand that the marginal FICA rate on a high earner is mostly just Medicare, which changes the calculus when you compare a salary against a bonus or a realization of capital gains. (Internal Revenue Service)
If you want to see your own numbers, the federal income tax estimator walks through FICA alongside the income-tax side so you can see the full take-home picture. (Social Security Administration)
The taxability of Social Security
Social Security benefits are partially taxable to higher-income filers. Up to 85% of benefits can be subject to income tax when combined income, defined as adjusted gross income plus nontaxable interest plus half of Social Security benefits, exceeds a threshold that in recent years has been around $34,000 for single filers and $44,000 for joint filers. The base amount is indexed for inflation, so the threshold moves a little each year. For a household that lives almost entirely on Social Security, the taxable portion can be small or zero, but for a household that also has wages, pensions, or investment income, the combined income can push a large share of the benefit into taxable income. (Social Security Administration)
This is a planning point, not just a reporting one. A traditional IRA withdrawal in retirement adds to combined income, which raises the taxable share of Social Security, so the two decisions are linked. Deferring a distribution or converting a traditional account in a low-income year can lower the combined income that sets the Social Security taxability, which is a real saving on top of the lower bracket the withdrawal lands in. (Social Security Administration)
The Medicaid look-back and estate planning
Medicaid is a need-based program, and the eligibility test looks back over a period of years at the assets and income you had when you applied. A large gift or a transfer of assets can disqualify you from Medicaid for a penalty period, so a gifting plan that is tax-efficient can also be Medicaid-risky. The right structure depends on your net worth and the timing of the need, and it is a question where the tax answer and the public-benefits answer can pull in opposite directions. For a household that is genuinely close to the Medicaid asset limit, a planner who understands both the tax and the program rules is worth the fee. (Social Security Administration)
What to model for a retiree
The retiree's tax picture is the sum of Social Security, pension, and investment income, each with its own taxability rules, plus the standard deduction and any senior bump. The model is a three-part stack: the Social Security taxability, the ordinary income from pension and investments, and the state layer, which for retirees can be a no-income-tax state or a state that exempts pension income. For a household that can choose where to retire, the state decision can matter more than the federal numbers, because the state layer can be the difference between a comfortable and a strained retirement budget. (Social Security Administration)
Disclaimer: This article is general educational information, not tax, legal, or investment advice. Dollar amounts come from the 2026 sources listed at the end of this article and may change. Before you act, talk to a licensed CPA, EA, or tax attorney about your own situation.