FICA taxes are Social Security and Medicare taxes taken from your paycheck
FICA stands for Federal Insurance Contributions Act. It is the law that requires your employer to withhold two specific taxes from your pay: one for Social Security and one for Medicare. These are not income taxes — they are separate payroll taxes that fund two federal insurance programs. You see them listed separately on your pay stub, usually labeled as "Social Security" and "Medicare" or sometimes as "FICA" with a breakdown.
The Social Security portion funds retirement, disability, and survivor benefits. The Medicare portion funds hospital insurance for people 65 and older and some younger people with disabilities. Both taxes are withheld automatically from your gross pay before you receive your paycheck, and your employer matches the amount you pay — meaning your employer contributes an equal sum on your behalf, though you do not see that money.
If you are self-employed, you pay both the employee and employer portions yourself, which is called self-employment tax. This is calculated on Schedule SE and added to your income tax return.
Key Takeaways
- FICA taxes consist of Social Security tax (6.2% of your wages up to an annual cap) and Medicare tax (1.45% of all wages with no cap).
- Your employer withholds these taxes from your paycheck and contributes an equal amount, though the employer contribution does not appear on your pay stub.
- Self-employed people pay both portions themselves through self-employment tax on Schedule SE.
- FICA taxes are separate from federal income tax withholding and appear as distinct line items on your pay stub.
- You build Social Security credits through FICA contributions, which determine your future retirement and disability benefits.
How much Social Security tax comes out of your paycheck
Social Security tax is 6.2% of your wages, but only up to a maximum amount of wages per year. That maximum changes each year. For 2024, the cap is $168,600 in wages — meaning once you earn that much in a calendar year, no more Social Security tax is withheld from your remaining paychecks that year. Your employer stops withholding it automatically.
This cap exists because Social Security benefits are tied to your earnings history, and there is a maximum benefit amount. High earners pay the same total Social Security tax as someone who hits the cap partway through the year, but they do not pay on income above the threshold.
If you work for more than one employer in the same year and together you exceed the wage cap, you may overpay Social Security tax. You can claim a credit for the overpayment on your tax return — it does not carry forward to the next year.
How much Medicare tax comes out of your paycheck
Medicare tax is 1.45% of all your wages with no upper limit. Unlike Social Security tax, there is no annual cap. You pay 1.45% on every dollar you earn, no matter how much you make.
High earners pay an additional Medicare tax of 0.9% on wages above a threshold amount. For 2024, that threshold is $200,000 for single filers and $250,000 for married couples filing jointly. Your employer is required to withhold this additional tax once your wages exceed the threshold in a calendar year. This extra tax funds the Medicare program and was added as part of the Affordable Care Act.
Unlike Social Security tax, there is no way to stop paying Medicare tax by reaching an earnings cap. It continues on every paycheck throughout the year.
The difference between FICA taxes and income tax withholding
FICA taxes and federal income tax withholding are two separate deductions from your paycheck, and they fund different programs. Income tax withholding is based on the W-4 form you complete with your employer — it depends on your filing status, number of dependents, and other income. The amount varies widely from person to person and can be adjusted by changing your W-4.
FICA taxes are fixed percentages set by law. Everyone pays the same rate regardless of their W-4. You cannot reduce or eliminate FICA withholding by changing your W-4 — it comes out of every paycheck at the same rate unless you hit the Social Security wage cap.
On your pay stub, you will see these listed separately. Income tax withholding usually appears as "Federal Income Tax" or "FIT". FICA appears as "Social Security" and "Medicare" or as separate line items labeled "FICA-SS" and "FICA-Med". Your employer also pays FICA taxes on your behalf, but those do not appear on your pay stub — they are a cost to the employer.
How FICA contributions build your Social Security record
Each year you pay Social Security tax, you earn Social Security credits (also called quarters of coverage). You can earn up to four credits per year. To earn one credit in 2024, you must earn at least $1,730 in wages subject to Social Security tax — the threshold changes each year. Most people who work full-time earn four credits per year.
You need 40 credits total to be covered by Social Security retirement benefits. That is roughly 10 years of full-time work. If you become disabled or die before reaching retirement age, you may be covered with fewer credits, depending on your age when the disability or death occurs.
Your Social Security record tracks your earnings history and the credits you have earned. When you reach retirement age, Social Security calculates your benefit based on your 35 highest-earning years. The more you earn and contribute, the higher your benefit will be. You can view your Social Security record and estimated benefits on the Social Security Administration website using your personal account.
What happens if you are self-employed
If you are self-employed, you do not have an employer to withhold FICA taxes. Instead, you pay self-employment tax, which covers both the employee and employer portions of Social Security and Medicare tax. Self-employment tax is calculated on Schedule SE and added to your Form 1040 when you file your tax return.
The self-employment tax rate is 15.3% (12.4% for Social Security and 2.9% for Medicare). However, you can deduct half of your self-employment tax as an adjustment to income, which reduces your taxable income. The Social Security portion still has an annual wage cap — for 2024, it is $168,600. The Medicare portion has no cap, and the additional 0.9% Medicare tax applies to self-employment income above the same thresholds as for employees.
Self-employed people must make quarterly estimated tax payments to cover both income tax and self-employment tax. These are due on April 15, June 15, September 15, and January 15 of the following year. If you do not pay enough throughout the year, you may owe a penalty when you file your return.
FICA taxes and non-wage income
FICA taxes explore only to wages and self-employment income. They do not explore to investment income, interest, dividends, capital gains, or rental income (unless you are in the business of renting property). This is one reason why high earners with significant investment income may pay a lower percentage of their total income in FICA taxes than someone whose income comes entirely from wages.
Certain types of work are exempt from FICA taxes. These include work performed by some religious groups that object to insurance, certain student workers at their school, and some family members working in a family business. If you think your work may be exempt, check with your employer or the Social Security Administration.
Frequently Asked Questions
Can I get a refund of FICA taxes I paid?
You cannot get a refund of FICA taxes unless you overpaid Social Security tax by working for multiple employers in the same year. You claim that overpayment as a credit on your tax return. Medicare tax and self-employment tax cannot be refunded — they are permanent contributions to the programs.
Do FICA taxes count toward my income tax refund or owed amount?
No. FICA taxes are separate from income tax. Your income tax refund or amount owed is calculated based only on federal income tax withholding and your actual tax liability. FICA taxes do not affect this calculation, though they do reduce your take-home pay.
What if my employer did not withhold FICA taxes?
Contact your employer when ready. They are legally required to withhold and pay FICA taxes. If they did not, you may still owe the taxes, and your employer may face penalties. Report the issue to the IRS or your state labor department if your employer refuses to correct it.
Do I pay FICA taxes on tips?
Yes. Tips are considered wages for FICA purposes. You must report all tips to your employer, and FICA taxes are withheld on the total of your wages plus reported tips. If you do not report tips, you may not receive credit for those earnings toward Social Security benefits.
How do I know if I have earned enough credits for Social Security?
Create a personal account on the Social Security Administration website (ssa.gov) to view your earnings record and the number of credits you have earned. You can also call Social Security at 1-800-772-1213 to request a statement of your record by mail.