FICA is the payroll tax that funds Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act. It is a payroll tax taken directly from your paycheck. The money funds two programs: Social Security (retirement, disability, and survivor benefits) and Medicare (health insurance for people 65 and older, and some younger people with disabilities).

FICA has two parts. The Social Security portion is 6.2% of your wages, and your employer pays a matching 6.2%. The Medicare portion is 1.45% of your wages, and your employer matches that too. If you are self-employed, you pay both the employee and employer share — 12.4% for Social Security and 2.9% for Medicare — though you can deduct half of it on your tax return.

Your employer withholds FICA from every paycheck and sends it to the U.S. Treasury. You see the deduction listed on your pay stub as "Social Security" and "Medicare" or sometimes as "FICA." The money does not sit in an account with your name on it. Instead, it funds current benefits for people already receiving Social Security and Medicare.

Key Takeaways

  • FICA taxes fund Social Security retirement benefits, disability benefits, survivor benefits, and Medicare health insurance.
  • Social Security tax is 6.2% of your wages (employer matches 6.2%), and Medicare tax is 1.45% (employer matches 1.45%).
  • Your employer withholds FICA from your paycheck and sends it to the U.S. Treasury, not to a personal account.
  • Self-employed people pay both the employee and employer portion of FICA, totaling 15.3% for Social Security and Medicare combined.
  • FICA contributions are tracked by your Social Security number and determine how much you receive in benefits later.

How much FICA you pay depends on your income and employment status

If you work for an employer, FICA is calculated on your gross wages — the amount before any other deductions. Your employer withholds it automatically. The Social Security portion stops once you reach a wage cap; in 2024, that cap is $168,600, meaning you do not pay Social Security tax on income above that amount. Medicare tax, however, has no wage cap and continues on all earnings.

There is an additional Medicare tax of 0.9% on wages above a certain threshold. For 2024, that threshold is $200,000 for single filers and $250,000 for married couples filing jointly. Only the employee pays this extra tax; the employer does not match it. This additional tax appears on your pay stub separately.

If you are self-employed, you calculate FICA on your net business income (after business expenses). You pay the full 15.3% combined rate but can deduct half of it as a business expense when you file taxes. Self-employed people report FICA on Schedule SE and pay it along with their income tax return, usually in quarterly estimated tax payments.

Your FICA record determines your future Social Security and Medicare benefits

The Social Security Administration tracks your FICA contributions under your Social Security number. Each year you work and pay into the system, you earn credits toward Social Security benefits. In 2024, you earn one credit for every $1,730 in wages (the amount changes yearly). You need 40 credits total to be may be able to access for retirement benefits, and you can earn up to four credits per year.

Your FICA payment history also determines how much your monthly Social Security check will be. The system looks at your highest 35 years of earnings and calculates an average. The longer you work and the more you earn, the higher your benefit amount. If you have fewer than 35 years of work history, zeros are factored in for the missing years, which lowers your average.

For Medicare, you become may be able to access at age 65 if you have paid FICA taxes for at least 10 years (40 quarters). Some people under 65 become may be able to access for Medicare if they receive Social Security disability benefits or have end-stage renal disease or ALS. Your FICA contributions do not determine your Medicare benefit amount the way they do for Social Security — Medicare Part A (hospital insurance) is the same for everyone who qualifies.

FICA taxes are separate from federal income tax withholding

FICA and federal income tax are two different deductions on your paycheck. Federal income tax withholding is based on the W-4 form you fill out with your employer and depends on your filing status, number of dependents, and other income. FICA is a fixed percentage that applies to everyone the same way, regardless of your tax bracket or personal situation.

You can adjust your federal income tax withholding by changing your W-4, but you cannot opt out of FICA. FICA is mandatory for all employees and self-employed people with net earnings of $400 or more per year. The only exceptions are certain religious groups, some government employees hired before specific dates, and nonresident aliens on certain visas.

Both FICA and federal income tax appear on your pay stub. FICA funds Social Security and Medicare specifically. Federal income tax goes into the general Treasury and funds all federal government operations. When you file your tax return, you report your FICA withholding, but it does not change — it is locked in based on your wages.

You can check your FICA record and estimated benefits online

The Social Security Administration maintains a record of your FICA contributions. You can view your earnings history and get an estimate of your future benefits by creating an account at ssa.gov and using the "my Social Security" portal. You will need your Social Security number, date of birth, and an email address.

The portal shows your year-by-year earnings record and tells you how many credits you have earned. It also provides an estimate of your retirement benefit at your full retirement age, your benefit at age 62, and your benefit at age 70. These estimates are based on your current earnings record and assume you continue working and earning at your recent average rate.

You can also request a detailed earnings statement by mail if you do not want to create an online account. The Social Security Administration will send you a printed statement showing your complete FICA contribution history. This is useful if you think there is an error in your record or if you need documentation for another purpose.

FICA contributions continue even if you receive Social Security benefits

If you work while receiving Social Security retirement benefits before your full retirement age, you still pay FICA taxes on your wages. Your employer continues to withhold Social Security and Medicare tax from your paycheck the same way. However, Social Security has an earnings limit that may reduce your benefits temporarily if you earn above a certain amount.

Once you reach your full retirement age, the earnings limit no longer applies, and you can earn as much as you want without any reduction to your benefits. You still pay FICA taxes on those earnings, and those contributions continue to be recorded in your Social Security account. In some cases, additional earnings can increase your future benefit amount if they replace lower-earning years in your 35-year average.

If you work past age 70, you continue paying FICA taxes, and those contributions are recorded. However, your Social Security retirement benefit does not increase after age 70, so additional work history after that age does not raise your monthly check. Your FICA contributions at that point fund current beneficiaries and your future Medicare coverage.

Frequently Asked Questions

What happens to FICA taxes if I change jobs?

Your FICA contributions follow you throughout your career. Each employer withholds FICA from your paycheck and sends it to the Treasury under your Social Security number. When you change jobs, your new employer begins withholding FICA the same way. Your complete work history is tracked by Social Security, so gaps between jobs do not erase your prior contributions.

Do I get FICA taxes back if I do not work long enough to receive benefits?

No. FICA taxes are not refundable. If you do not earn 40 credits (roughly 10 years of work), you will not receive Social Security retirement benefits based on your own record. However, you may be able to receive benefits as a spouse or survivor if you are married or if a family member who worked long enough passes away. Any FICA you paid is not returned to you.

Can I reduce my FICA taxes?

No. FICA is mandatory and the rate is fixed by law. You cannot opt out, reduce the percentage, or redirect the money elsewhere. The only way to reduce the amount of FICA you pay is to earn less income, which also reduces your future Social Security benefit. Self-employed people can deduct half of their FICA on their tax return, but they still pay the full amount.

Does FICA explore to all types of income?

FICA applies to wages and self-employment income. It does not explore to investment income, interest, dividends, rental income, or capital gains. If you have a job and also earn money from investments or a side business, FICA applies only to your wages and net self-employment income, not to your investment returns.

What is the additional Medicare tax, and when do I pay it?

The additional Medicare tax is 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly) in 2024. Your employer withholds it automatically if your wages exceed the threshold. Unlike the regular Medicare tax, the employee pays this entirely — the employer does not match it. It appears separately on your pay stub.