FICA is two separate payroll taxes combined into one deduction

FICA stands for the Federal Insurance Contributions Act. When you see it on your pay stub, you are looking at two different taxes taken out together: Social Security tax and Medicare tax. They are collected at the same time and sent to the federal government, but they fund completely different programs and work in different ways.

Your employer also pays a matching amount for each tax. The employee and employer portions together make up the full FICA contribution, though you only see your half on your paycheck.

Key Takeaways

  • FICA consists of Social Security tax (6.2% of wages) and Medicare tax (1.45% of wages), taken from your paycheck each pay period.
  • Social Security tax funds retirement, disability, and survivor benefits; Medicare tax funds hospital insurance and other medical coverage for people 65 and older.
  • Your employer pays an equal amount for both taxes, though you only see your portion deducted from your wages.
  • Social Security tax has a wage cap each year, meaning once you earn above that amount, no more is taken; Medicare tax has no cap.
  • Self-employed people pay both the employee and employer portions themselves, totaling 15.3% of net self-employment income.

Social Security tax: 6.2% of your wages

The Social Security portion of FICA is 6.2% of your gross wages. This money goes into the Social Security trust fund, which pays out retirement benefits, disability benefits, and survivor benefits to people who have worked and paid into the system.

Social Security tax has a wage cap, which changes each year. Once your wages reach that cap in a calendar year, your employer stops taking Social Security tax from your paychecks for the rest of that year. For 2024, the cap is $168,600, meaning if you earn more than that, no Social Security tax is taken on income above that amount. Your employer must still pay their matching 6.2% on all your wages, but you do not.

If you work for multiple employers in the same year and your combined wages exceed the cap, you may have overpaid Social Security tax. You can claim a refund of the overpayment when you file your federal income tax return.

Medicare tax: 1.45% of your wages, with no cap

The Medicare portion of FICA is 1.45% of your gross wages, with no upper limit. Unlike Social Security tax, there is no wage cap—Medicare tax is taken on every dollar you earn, no matter how much you make.

Medicare tax funds Part A (hospital insurance) and helps support Parts B and D (medical insurance and prescription drug coverage) for people 65 and older, as well as some younger people with disabilities or end-stage renal disease.

There is an additional Medicare tax of 0.9% that applies to wages over a certain threshold. For single filers in 2024, this threshold is $200,000; for married filing jointly, it is $250,000. Only the employee pays this additional tax—the employer does not have a matching portion. This additional tax is sometimes shown separately on your pay stub as "Additional Medicare Tax" or "Medicare Surtax."

How much your employer contributes

Your employer matches your FICA contributions dollar for dollar. If you pay 6.2% in Social Security tax, your employer pays 6.2%. If you pay 1.45% in Medicare tax, your employer pays 1.45%. The additional 0.9% Medicare tax is your responsibility alone—your employer does not match it.

This employer contribution is a real cost to the business, but it does not appear on your pay stub as a deduction. It is paid separately to the IRS. The total FICA cost to an employer for a typical employee is 7.65% of wages (6.2% Social Security plus 1.45% Medicare), plus the additional Medicare tax if applicable.

Self-employed people pay both portions

If you are self-employed, you pay both the employee and employer portions of FICA yourself. This is called self-employment tax, and it totals 15.3% of your net self-employment income (12.4% for Social Security and 2.9% for Medicare, before the additional Medicare tax).

You calculate self-employment tax on Schedule SE of your tax return. You can deduct half of your self-employment tax as an adjustment to income on your 1040, which reduces your taxable income slightly. The other half is your contribution, similar to what an employee pays.

Where FICA money goes

Social Security tax and Medicare tax are not held in a personal account with your name on it. They go into federal trust funds that pay current beneficiaries. Social Security tax funds the Old-Age, Survivors, and Disability Insurance (OASDI) program. Medicare tax funds the Hospital Insurance Trust Fund and helps support the Supplementary Medical Insurance Trust Fund.

When you reach retirement age, become disabled, or if your family members become may be able to access as survivors, you receive benefits from these programs based on your earnings record and how long you have paid into the system. The amount you receive is not a direct return of what you paid in—it is calculated using a formula that considers your highest 35 years of earnings and the age at which you claim benefits.

FICA on your pay stub

Your pay stub shows FICA deductions broken down by type. You will typically see a line for "Social Security" or "OASDI" showing 6.2% of your gross wages, and a line for "Medicare" showing 1.45%. If your wages are high enough to trigger the additional Medicare tax, that appears on a separate line.

The total of these deductions is what comes out of your paycheck. Your employer's matching contributions are not shown on your pay stub because they are paid directly to the IRS, not deducted from your wages.

Frequently Asked Questions

Why is FICA taken out if I might not get the money back?

FICA funds current retirees and disabled workers right now, not a personal savings account for your future. You pay in while working, and when you retire or become disabled, the next generation of workers pays in to fund your benefits. The system is designed to provide a safety net, not to return exactly what you contributed.

Can I opt out of paying FICA?

No. FICA is mandatory for all employees and self-employed people. Some religious groups have limited exemptions from self-employment tax, but these are rare and require IRS approval. If you are an employee, you cannot avoid FICA deductions.

What happens if I work part-time or have multiple jobs?

Each employer withholds FICA based on your wages from that job. If your combined wages from all jobs exceed the Social Security wage cap, you may overpay Social Security tax. You can claim a refund of the overpayment when you file your tax return, but you cannot avoid the withholding during the year.

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, or capital gains. It also does not explore to certain types of compensation, such as some fringe benefits or employer-provided health insurance premiums.

If I move to another country, do I still pay FICA?

U.S. citizens and resident aliens must pay FICA on wages earned anywhere in the world. If you work abroad for a U.S. employer, FICA still applies. If you work for a foreign employer, the rules are more complex and depend on tax treaties between the U.S. and that country.