Everything the Payroll Tax Funds

We mentioned earlier that Social Security is a type of payroll tax. This gives way to the fact that there are other types of payroll taxes, mainly Medicare tax and the Federal Unemployment tax.

You might also find them all under different names, which could lead to further confusion. For now, you should be aware that Social Security is also known as Old Age, Survivors, and Disability Insurance or OASDI and The Federal Unemployment tax is also known by Federal Unemployment Tax Act or FUTA. Together, they make up the Federal Insurance Contributions Act, commonly referred to as FICA.

Naturally, these taxes are paid differently, meaning that their rates will vary. Furthermore, both the employer and employee have to pay different rates, which will be particular to each payroll tax. Social Security is split evenly between employer and employee at 12.4%. The Medicare tax is also split evenly, but it is levied at 2.9%, though high income earners must pay an additional 0,9%. Typically, the Federal Unemployment tax is paid by the employer alone and it is levied at 6%.