FICA tax is the money your employer withholds from each paycheck for Social Security and Medicare

FICA stands for Federal Insurance Contributions Act. It is a payroll tax split into two parts: 6.2% goes to Social Security and 1.45% goes to Medicare. Your employer withholds these amounts directly from your gross pay before you see your paycheck. If you are self-employed, you pay both the employee and employer portions yourself — 12.4% for Social Security and 2.9% for Medicare — when you file your tax return.

The money does not sit in an account with your name on it. Social Security and Medicare are pay-as-you-go programs. The FICA tax collected from today's workers pays benefits to people who are retired, disabled, or on Medicare right now. In return, when you retire or become unable to work, your own benefits will be funded by future workers' FICA taxes.

You will see FICA taxes listed separately on your pay stub under labels like "Social Security" and "Medicare" or sometimes just "FICA." The amount changes if your pay changes, but the percentage stays the same for most workers.

Key Takeaways

  • FICA tax is split between Social Security (6.2%) and Medicare (1.45%), and your employer withholds both from your paycheck automatically.
  • Social Security tax only applies to the first $168,600 of your annual income in 2024, but Medicare tax applies to all your wages with no cap.
  • Your employer also pays an equal amount of FICA tax on your behalf, but that money does not show up on your paycheck.
  • FICA taxes fund current retirees and Medicare beneficiaries, not a personal savings account in your name.
  • Self-employed people pay the full FICA amount themselves when they file taxes, but can deduct half of it as a business expense.

How much FICA tax comes out of your paycheck

The employee portion of FICA is 7.65% of your gross pay: 6.2% for Social Security and 1.45% for Medicare. If you earn $1,000 in a pay period, FICA takes $76.50. This amount is the same whether you are paid weekly, biweekly, or monthly — it is always a percentage of what you earn.

However, Social Security tax has a wage base limit. In 2024, you only pay Social Security tax on the first $168,600 of income you earn in a calendar year. Once you reach that threshold, your employer stops withholding the 6.2% for Social Security for the rest of the year. Medicare tax has no limit — you pay 1.45% on all your wages, no matter how much you earn. High earners also pay an additional 0.9% Medicare tax on income above $200,000 (single) or $250,000 (married filing jointly).

To find your exact FICA withholding, look at your pay stub. It will show the gross amount, the FICA deductions broken down by type, and your net pay after all deductions.

What your employer pays in FICA on your behalf

Your employer also contributes to FICA — the same 6.2% for Social Security and 1.45% for Medicare. This is a total of 7.65%, matching what comes out of your paycheck. The employer portion does not appear on your pay stub because it is not deducted from your wages. Your employer sends it directly to the IRS along with your employee withholding.

This employer contribution is a real cost to the business, but it is separate from your salary. If you earn $50,000 a year, your employer pays $3,825 in FICA taxes on your behalf in addition to your salary. From the employer's perspective, your total cost to the company is your salary plus the employer FICA tax.

Self-employed people do not have an employer to split the cost, so they pay both portions themselves. A self-employed person earning $50,000 owes $7,650 in FICA tax (15.3% of income). However, they can deduct half of this amount — $3,825 — as a business expense when calculating their adjusted gross income, which reduces their overall tax burden.

The Social Security wage cap and why it matters

Social Security tax stops explore once you earn $168,600 in a single year (2024 figure; this amount increases slightly most years based on wage growth). If you earn $200,000, you pay Social Security tax only on the first $168,600. The remaining $31,400 is not subject to the 6.2% Social Security tax.

This wage cap affects high earners and people who change jobs mid-year. If you work for two employers in the same year and earn $100,000 at each job, you will pay Social Security tax on both amounts — $12,400 total — because each employer withholds based on what they pay you, not on your total income across all jobs. You can claim a credit for the overpayment when you file your tax return, and the IRS will refund the excess.

Medicare tax has no wage cap. You pay 1.45% on every dollar you earn, and high earners pay an additional 0.9% on income above the thresholds mentioned earlier. This is why Medicare tax continues to grow with your income while Social Security tax plateaus.

Where FICA tax money actually goes

The Social Security portion of your FICA tax funds three programs: retirement benefits for workers age 62 and older, disability benefits for workers who cannot work due to a medical condition, and survivor benefits for the families of deceased workers. Medicare tax funds hospital insurance (Part A), which covers inpatient hospital care, skilled nursing, hospice, and home health services.

These are not savings accounts. The money collected this year pays benefits to current retirees and beneficiaries. The Social Security Administration and Centers for Medicare & Medicaid Services (CMS) manage these funds and set benefit amounts based on your earnings history and age when you claim.

Both programs publish annual reports on their financial status. Social Security's trust fund is projected to be depleted in 2034 unless Congress changes the law, which would mean the program could only pay about 80% of scheduled benefits from incoming tax revenue. Medicare's Hospital Insurance trust fund faces similar long-term challenges. These are policy questions for lawmakers, not something your individual FICA payment changes.

FICA tax on different types of income

FICA tax applies to wages and salaries from a job. It also applies to tips you report to your employer, bonuses, commissions, and most other forms of compensation you receive as an employee. Your employer withholds FICA on these amounts the same way they do for regular pay.

FICA does not explore to investment income like stock dividends, capital gains, or interest from savings accounts. It does not explore to gifts, inheritance, or insurance payouts. If you receive unemployment benefits, those are not subject to FICA tax, though they are subject to income tax.

Self-employed people pay FICA tax (called self-employment tax on the tax return) on net profit from their business. Certain groups are exempt from FICA, including some religious communities that have opted out, some government employees hired before specific dates, and nonresident aliens working temporarily in the United States on certain visa types.

How to read FICA on your pay stub

Your pay stub shows FICA withholding in a section usually labeled "Deductions" or "Taxes." You will see separate line items for Social Security and Medicare, or sometimes they are grouped under "FICA." The amount shown is what your employer withholds from your pay.

The pay stub also shows year-to-date totals for FICA taxes. This running total helps you track whether you have hit the Social Security wage cap. Once your year-to-date Social Security withholding reaches $10,453.20 (6.2% of $168,600 in 2024), your employer stops withholding the 6.2% for the rest of the year, though Medicare withholding continues.

If you have multiple jobs, each employer withholds FICA independently based on what they pay you. This can result in overpaying Social Security tax if your combined income exceeds the wage base. You will see this reflected in your year-to-date totals across all your pay stubs. When you file your tax return, you can claim a credit for any Social Security tax overpaid.

Frequently Asked Questions

Can I opt out of paying FICA tax?

No, FICA tax is mandatory for almost all employees and self-employed people. A very small number of religious groups have obtained exemptions through a formal process with the IRS, but this is not available to individuals who straightforward object to the tax. If you are self-employed, you must pay self-employment tax on your net business income.

What happens if I overpay Social Security tax because I had multiple jobs?

You will receive a credit when you file your tax return. The IRS will refund the excess Social Security tax you paid above the annual limit. This happens automatically when you file — you do not need to request it separately. The credit appears on your tax return form.

Does FICA tax count toward my income tax?

No. FICA tax and income tax are separate. Your paycheck has both withheld. FICA funds Social Security and Medicare specifically. Income tax funds general government operations. Both appear on your pay stub as separate line items.

Why do I pay FICA tax if I might not collect Social Security?

FICA tax funds not only retirement benefits but also disability and survivor benefits. Even if you never claim retirement benefits, your FICA contributions may support your family if you become disabled or pass away. Additionally, you build a record of earnings that affects any benefits you might claim later.

Do I pay FICA tax on a bonus or commission?

Yes. Bonuses, commissions, and other forms of compensation from your employer are subject to FICA tax at the same 7.65% rate as your regular wages. Your employer withholds FICA on these payments when they are issued.