The Basic Formula for FICA Tax
FICA tax is calculated by taking your gross pay — the amount you earn before any deductions — and multiplying it by a fixed percentage. For Social Security, that percentage is 6.2%. For Medicare, it is 1.45%. Your employer withholds both amounts from each paycheck and sends them to the federal government on your behalf.
The math is straightforward: if you earn $1,000 in a paycheck, Social Security takes $62 and Medicare takes $14.50. These amounts come out of your pay before you see the money in your account. Your employer also pays an equal amount (6.2% for Social Security, 1.45% for Medicare) on top of what they pay you, though that does not appear on your paycheck.
The percentages have stayed the same for many years, though Congress can change them. The Social Security rate has been 6.2% since 1990. The Medicare rate has been 1.45% since 1966, though an additional 0.9% Medicare tax applies to higher earners — more on that below.
Key Takeaways
- Social Security tax is 6.2% of your gross pay, and Medicare tax is 1.45%, for a combined FICA rate of 7.65%.
- FICA is calculated on every paycheck, starting from your first dollar of income with no threshold or waiting period.
- Social Security tax stops once you hit the annual wage base limit, which changes each year; Medicare tax does not have a wage base limit.
- High earners pay an additional 0.9% Medicare tax on income above $200,000 (single) or $250,000 (married filing jointly).
- Self-employed people pay both the employee and employer share of FICA, totaling 15.3%, though they can deduct half on their tax return.
The Social Security Wage Base Limit
Social Security tax only applies to income up to a certain amount each year. That amount is called the wage base limit, and it changes annually. In 2024, the limit is $168,600. This means if you earn $200,000 in a year, you only pay Social Security tax on the first $168,600 of that income.
Once you reach the wage base limit in a calendar year, your employer stops withholding Social Security tax from your remaining paychecks for that year. If you change jobs mid-year, you might pay Social Security tax on more than the limit across both employers, but you can claim a credit for the overpayment when you file your tax return.
Medicare tax has no wage base limit. You pay 1.45% on every dollar you earn, no matter how much you make in a year.
Additional Medicare Tax for High Earners
If your income exceeds certain thresholds, you pay an extra 0.9% Medicare tax on the amount above that threshold. For single filers, the threshold is $200,000. For married couples filing jointly, it is $250,000. For married people filing separately, it is $125,000.
This additional tax is withheld by your employer if your income from that job alone exceeds the threshold. If you have multiple jobs or your spouse also works, the withholding might not be correct, and you may owe more tax or be owed a refund when you file your return. Self-employed people calculate this tax themselves on their tax return.
How FICA Is Withheld Throughout the Year
Your employer calculates FICA on each paycheck and withholds it when ready. The amount depends on how often you are paid. If you are paid weekly, FICA is calculated on that week's gross pay. If you are paid biweekly, it is calculated on two weeks of pay. If you are paid monthly, it is calculated on that month's pay.
Your paycheck stub shows the FICA amounts withheld under labels like "Social Security Tax" or "OASDI" (Old-Age, Survivors, and Disability Insurance) and "Medicare Tax" or "HI" (Hospital Insurance). These line items let you see exactly how much was taken out and verify the calculation is correct.
The withholding happens the same way whether you are a full-time employee, part-time employee, or temporary worker. FICA applies to nearly all wages, with only a few exceptions like certain religious groups and some government employees with their own pension systems.
Self-Employment FICA Calculation
If you are self-employed, you pay both the employee and employer share of FICA yourself. That means you pay 12.4% for Social Security and 2.9% for Medicare, totaling 15.3% of your net self-employment income. This is called self-employment tax.
You calculate self-employment tax on Schedule SE, which is part of your annual tax return. The calculation uses your net profit from self-employment (your business income minus business expenses), not your gross revenue. Once you have calculated the amount owed, you can deduct half of it on your tax return, which slightly reduces your overall tax burden.
Self-employed people also pay the additional 0.9% Medicare tax if their income exceeds the thresholds mentioned above. The self-employment tax calculation is more complex than employee withholding because you are responsible for calculating and paying it yourself, usually through quarterly estimated tax payments.
What Happens to the Money You Pay
The FICA taxes you pay fund two separate trust funds: the Social Security trust fund and the Medicare trust fund. Social Security money goes toward retirement benefits, survivor benefits, and disability benefits. Medicare money goes toward hospital insurance (Part A) and is also used to help fund Medicare Part B and Part D.
The money is not held in an account with your name on it. Instead, current FICA taxes pay current beneficiaries. When you retire, future workers' FICA taxes will help pay your benefits. This is why FICA is sometimes called a "pay-as-you-go" system.
Your earnings record is tracked by Social Security using your Social Security number. You can view your estimated benefits and check that your earnings are recorded correctly by creating an account at ssa.gov.
Common Mistakes in FICA Calculation
The most common error is miscalculating the wage base limit. Some employers continue withholding Social Security tax after an employee has reached the annual limit, which creates an overpayment that must be refunded. This is especially common when an employee changes jobs or receives a large bonus late in the year.
Another mistake happens when employers misclassify workers as independent contractors instead of employees. Independent contractors are responsible for their own self-employment tax, while employees have FICA withheld by their employer. If you are classified incorrectly, you may pay more tax than you should, or you may not pay enough.
High earners sometimes do not have enough additional Medicare tax withheld if they have multiple jobs or if their spouse's income is not considered. This can result in a tax bill when you file your return. You can adjust your withholding by submitting a new W-4 form to your employer if you think this might happen to you.
Frequently Asked Questions
Does FICA tax explore to tips and bonuses?
Yes. Tips are treated as wages and are subject to FICA tax. Your employer withholds FICA on reported tips. Bonuses are also subject to FICA tax at the same rate as regular wages. Both count toward the Social Security wage base limit.
What if I work for a nonprofit or government employer?
Most nonprofit employees pay FICA tax the same way private employees do. Some government employees, particularly those hired before certain dates or in specific pension systems, are exempt from Social Security tax but may pay Medicare tax. Check with your employer's payroll department about your specific situation.
Can I opt out of paying FICA tax?
No, with very limited exceptions. Members of certain religious groups that have received IRS approval can request exemption from self-employment tax, but this is rare and requires a formal process. Employees cannot opt out of FICA withholding.
Do I pay FICA on investment income or rental income?
No. FICA applies only to wages and self-employment income from a business or trade. Investment income like dividends, capital gains, and interest are not subject to FICA tax, though they may be subject to other income taxes.
What if my employer withheld the wrong amount of FICA?
Check your paycheck stub and W-2 form to verify the amounts. If you overpaid, you will receive a refund when you file your tax return. If you underpaid, you will owe the difference. Significant errors should be reported to your employer's payroll department so they can correct future paychecks.