The payroll tax rate for 2025 consists of federal payroll taxes, state unemployment taxes, and state withholdings. These taxes, specifically the Social Security and Medicare taxes (FICA taxes), are split between the employer and the employee. The employer withholds the FICA taxes from the employee wages. However, they must pay a matching amount for each employee.
If an employee earns $1,000, then the employer withholds the Federal Social Security tax (6.2% for $62) and the Federal Medicare Tax (1.45% for $14.50). The employee has $74.50 withheld for the FICA taxes. The employer then pays an additional $74.50. So the federal government receives $149 for one employee.
Are there any local taxes on payroll?
No, no localities in Virginia impose any additional payroll taxes. Cities and counties rely on sales taxes, use taxes, business license taxes, property taxes, and sometimes regional transportation levies (public transportation fees).
What is in the payroll tax?
The FICA Taxes:
- Federal Social Security Tax: The current social security tax rate is 6.2%. However, this tax has a wage base limit, meaning it can only apply up to a certain earning amount. In 2025, the wage base limit is $176,1000 for a maximum tax liability of $10,918.20.
- Federal Medicare Tax: The current medicare tax rate is 1.45% with no wage base limit. However, there is an additional tier for employees making $200,000 or more a year. The employee must pay an additional 0.9% but this additional medicare tax is not matched by the employer.
Let’s see that in action. If an employee makes $200,000 a year, then they pay $4,700 in Federal medicare tax. (1.45 + 0.9 = 2.35; 200,000 x 0.0235 = 4,700.) However, the employer only has to match the initial 1.45% tax rate. So the employer pays $2,900 (200,000 x 0.0145 = 2,900). And the federal government receives a total of $7,600.
Additional Taxes:
- Federal Unemployment Tax Act (FUTA): This tax rate is 0.6% with a wage base of $7,000. Only the employer pays the FUTA, but they pay it for all of their employees. For more information on the FUTA read our blog.
- Virginia State Unemployment Insurance (SUI): This rate rate ranges from 0.1% to 6.2% with a wage base of $8,000. Again, only the employers pay this, but they pay it for all of their employees.
- Virginia State Income Tax Withholding: Here, the employer withholds 2%-5.75% from all wages with no wage base limit. The employer also does NOT have to match this tax like they do with the FICA taxes. The employer withholds this tax rate from the employees and remits it to the state.
Remember, these are tax rates for 2025.
These individual tax rates might be different by the time you’re reading this. Make sure to keep up to date with the current tax rates. Contact us and stay ahead of the curve with our payroll solutions.
Disclaimer: This blog post is for informational purposes only and should not be construed as legal advice. Always consult the official resources and seek legal counsel if necessary for complete and accurate information regarding specific regulations and practices.