FICA is the money your employer withholds from your paycheck for Social Security and Medicare
FICA stands for the Federal Insurance Contributions Act. It is a payroll tax that funds two programs: Social Security and Medicare. When you see FICA on your pay stub, it shows how much money your employer has taken from your gross pay — the amount before taxes — and sent to the federal government on your behalf.
FICA has two parts. The first part funds Social Security, which provides retirement income, disability benefits, and survivor benefits. The second part funds Medicare, which covers hospital insurance and medical insurance for people 65 and older, and for some younger people with disabilities or end-stage renal disease.
Unlike federal income tax withholding, which depends on how many dependents you claim and your filing status, FICA withholding is the same percentage for almost everyone. Your employer is required by law to withhold it and match the amount you pay — meaning your employer contributes an equal sum on top of what comes out of your check.
Key Takeaways
- FICA withholding on your pay stub shows Social Security tax (6.2% of your gross pay) and Medicare tax (1.45% of your gross pay) combined.
- Your employer withholds FICA from your paycheck and also pays an equal amount to the federal government, so the total cost to your employer is double what you see withheld.
- FICA withholding continues for every dollar you earn, with no annual cap on Medicare tax, but Social Security tax stops once you reach the annual wage base limit.
- The money withheld goes into trust funds that pay current beneficiaries; it is not held in a personal account with your name on it.
- Self-employed people pay both the employee and employer portions of FICA, which is called self-employment tax.
How much FICA comes out of your paycheck
The Social Security portion of FICA is 6.2% of your gross pay. The Medicare portion is 1.45% of your gross pay. Together, FICA is 7.65% of what you earn before any other deductions.
The Social Security tax has an annual wage base limit, which means once you earn above a certain amount in a calendar year, no more Social Security tax is withheld from your remaining paychecks that year. The Medicare tax has no limit — it continues on every dollar you earn, no matter how much you make. Additionally, if your income exceeds certain thresholds (which vary by filing status), you may owe an additional 0.9% Medicare tax on the excess income.
Your pay stub will usually show FICA as a single line item or broken into two lines: one for Social Security and one for Medicare. The dollar amount withheld depends on your gross pay for that pay period.
Why your employer also pays FICA
The law requires your employer to contribute an amount equal to what is withheld from your paycheck. If you pay 7.65% in FICA, your employer pays another 7.65% on your behalf. This employer contribution does not appear on your pay stub because it is not deducted from your wages — it is a separate cost to the employer.
The total FICA cost to your employer is 15.3% of your gross pay (7.65% from you plus 7.65% from them). This is why employers care about payroll costs: FICA is a mandatory expense on top of your salary.
Self-employed people do not have an employer to split the cost, so they pay both portions themselves. This is called self-employment tax, and it is calculated and paid separately from income tax.
Where FICA money goes
FICA taxes go into two separate trust funds managed by the U.S. Treasury. The Social Security portion funds the Old-Age, Survivors, and Disability Insurance Trust Fund. The Medicare portion funds the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund.
These are not savings accounts with your name on them. The money collected from current workers pays benefits to current retirees, disabled workers, and their families. When you retire or become disabled, your benefits will be paid from FICA taxes collected from workers at that time.
The amount of Social Security or Medicare benefit you receive later depends on your earnings history and age, not on how much FICA you paid in total.
FICA withholding versus federal income tax withholding
FICA and federal income tax are two separate withholdings on your pay stub. Federal income tax is based on the W-4 form you fill out when you start a job — it depends on your filing status, number of dependents, and other income. FICA is automatic and the same for nearly everyone.
You cannot avoid FICA withholding by changing your W-4. Even if you claim exempt from federal income tax withholding, FICA still comes out. The only way to reduce FICA withholding is to earn less money or to reach the Social Security wage base limit partway through the year.
Federal income tax goes to the Internal Revenue Service and funds general government operations. FICA goes to the Social Security Administration and Centers for Medicare and Medicaid Services and funds only those two programs.
When FICA withholding stops during the year
Social Security tax stops once you earn above the annual wage base limit in a calendar year. This limit changes each year. Once you reach it, no more Social Security tax is withheld from your remaining paychecks for that year.
Medicare tax does not stop. It continues on every dollar you earn throughout the year. However, if your total income for the year exceeds certain thresholds, you may owe an additional 0.9% Medicare tax when you file your tax return.
If you work for more than one employer in the same year and together earn above the Social Security wage base limit, you may have overpaid Social Security tax. You can claim a refund of the overpayment when you file your federal income tax return.
FICA on your pay stub versus what you actually owe
The FICA amount shown on your pay stub is what your employer withheld that pay period. This is not necessarily the final amount you owe for the year. If you are self-employed, you calculate self-employment tax on your net profit, which may be different from your gross income. If you work multiple jobs, your total FICA may differ from what was withheld.
Most employees do not need to do anything with FICA at tax time — the withholding is final. However, if you overpaid Social Security tax due to multiple employers, or if you are self-employed and owe self-employment tax, you will handle that when you file your tax return.
Frequently Asked Questions
Can I opt out of FICA withholding?
No. FICA withholding is mandatory for all employees. You cannot avoid it by changing your W-4 or requesting an exemption. The only exception is for certain religious groups that have received an exemption from the Internal Revenue Service, which is rare and requires a formal process.
Why does FICA come out if I will not retire for 30 years?
FICA funds current beneficiaries today. When you retire, workers at that time will pay FICA to fund your benefits. It is a pay-as-you-go system, not a personal savings account. You build a record of earnings that determines your benefit amount when you become may be able to access.
What happens to FICA if I change jobs?
FICA continues to be withheld from every paycheck at every job. Your earnings are tracked by your Social Security number across all employers. If you earn above the Social Security wage base limit across multiple jobs in one year, you may overpay Social Security tax and can claim a refund on your tax return.
Is FICA the same as payroll tax?
FICA is one type of payroll tax. Payroll tax is a broad term that includes FICA (Social Security and Medicare), federal income tax withholding, and state and local taxes if applicable. Your pay stub may show all of these separately.
Do I get FICA back if I do not work long enough to retire?
No. FICA is not refundable. However, you do not need to work a certain number of years to receive some Social Security benefit. You need 40 credits (roughly 10 years of earnings) to be may be able to access for retirement benefits. If you do not reach that threshold, your FICA contributions go into the trust fund to pay other beneficiaries.