Payroll Tax
TaxGlossary term
Definition
Taxes withheld from employee paychecks and paid by employers to fund Social Security and Medicare. Employees and employers each pay 7.65% of wages, split between Social Security (6.2%) and Medicare (1.45%).
Related terms
- Withholding TaxThe portion of an employee's wages that an employer sends directly to the government as a prepayment of income tax. The amount withheld depends on income, filing status, and the W-4 form submitted to the employer.
- Social SecurityA federal program providing retirement, disability, and survivor benefits funded through payroll taxes. Retirement benefits are based on your 35 highest-earning years and the age at which you begin collecting. Full retirement age ranges from 66 to 67.
- Gross IncomeTotal income earned before taxes and deductions. For individuals, it includes wages, tips, investment income, and other earnings.
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