FICA is two separate taxes taken from your paycheck

FICA stands for Federal Insurance Contributions Act. It funds Social Security and Medicare. Your employer takes FICA taxes directly from your paycheck — you do not pay them separately. FICA has two parts: Social Security tax at 6.2 percent of your wages, and Medicare tax at 1.45 percent. Your employer also pays a matching amount on your behalf, though that does not come out of your check.

The Social Security portion stops once you hit a wage cap each year — in 2024, that cap is $168,600. After you earn that much, no more Social Security tax comes out. Medicare tax has no cap and continues on all wages you earn. If you are self-employed, you pay both the employee and employer share, which totals 15.3 percent, though you can deduct half of it on your tax return.

Key Takeaways

  • Social Security tax is 6.2 percent of your gross wages up to the annual wage cap, which changes each year.
  • Medicare tax is 1.45 percent of all your gross wages with no upper limit.
  • Your employer withholds both amounts from your paycheck and pays a matching amount separately.
  • Additional Medicare tax of 0.9 percent applies to wages over $200,000 for single filers and $250,000 for married couples filing jointly.
  • Self-employed workers pay both the employee and employer portions, totaling 15.3 percent before deductions.

How to calculate Social Security tax

Start with your gross wages — the amount before any deductions. Multiply that number by 0.062 (which is 6.2 percent). That is your Social Security tax for that pay period. If you are paid weekly and earn $1,000 gross, your Social Security tax is $1,000 × 0.062 = $62.

The catch is the wage cap. Once your total wages for the year reach $168,600 (in 2024), your employer stops taking Social Security tax from your remaining paychecks that year. The cap changes annually — the Social Security Administration announces the new figure each October for the following year. If you change jobs mid-year, each employer withholds based on what you earned at that job alone, not your total across all employers. This can mean you overpay Social Security tax, which you recover when you file your tax return.

How to calculate Medicare tax

Medicare tax is simpler because there is no wage cap. Multiply your gross wages by 0.0145 (which is 1.45 percent). Using the same $1,000 weekly example, your Medicare tax is $1,000 × 0.0145 = $14.50. This applies to every paycheck, no matter how much you have already earned that year.

Most workers stop there. However, if your wages exceed $200,000 in a single year (or $250,000 if you are married filing jointly), an additional Medicare tax of 0.9 percent kicks in on the amount over that threshold. Your employer is required to withhold this automatically once you cross the threshold. Unlike the Social Security cap, this additional tax has no upper limit — it continues on all wages above the threshold for the rest of the year.

What your paycheck stub shows

Your paycheck stub (or pay statement) lists FICA taxes separately. You will see a line for "Social Security" or "OASDI" (Old-Age, Survivors, and Disability Insurance) and another for "Medicare" or "HI" (Hospital Insurance). Each shows the amount withheld that pay period. Some stubs also show year-to-date totals, which helps you track whether you are approaching the Social Security wage cap.

If you see a line for "Additional Medicare Tax" or "Medicare 0.9%", that means your wages crossed the threshold for the year. The amount shown is what was withheld that pay period for the additional tax. This line only appears once you reach the income threshold.

Self-employed FICA calculation

If you are self-employed, you pay both the employee and employer portions of FICA, called self-employment tax. The combined rate is 15.3 percent (12.4 percent for Social Security, 2.9 percent for Medicare). You calculate it on your net self-employment income — your business income minus business expenses.

The Social Security portion still has a wage cap. In 2024, you pay self-employment tax on net income up to $168,600. After that, only the Medicare portion (2.9 percent) applies to additional income. When you file your tax return using Schedule SE, you calculate the exact amount owed. You can then deduct half of your self-employment tax on your Form 1040, which reduces your taxable income.

Common mistakes when calculating FICA

The biggest mistake is forgetting the Social Security wage cap. If you change jobs mid-year, each employer withholds Social Security tax based only on what you earned there. If you earned $100,000 at Job A and $80,000 at Job B, you will have paid Social Security tax on all $180,000 even though the cap is $168,600. You will have overpaid by $744 (the tax on the $12,000 over the cap). You recover this overpayment when you file your tax return — it reduces your tax bill or increases your refund.

Another common error is using net income instead of gross income. FICA taxes are calculated on your gross wages before any deductions like health insurance, retirement contributions, or child support. Your paycheck stub shows the calculation, so if you are doing it yourself, make sure you start with the right number.

Where to find the current wage cap and tax rates

The Social Security Administration publishes the annual wage cap on its website (ssa.gov) each October. The current tax rates — 6.2 percent for Social Security and 1.45 percent for Medicare — have been stable for years, but the wage cap changes annually based on average wage growth. If you are self-employed or managing payroll, bookmark the SSA page so you have the correct figure for the year you are working in.

Your paycheck stub is also a reliable source. It shows the exact rates and amounts being withheld, so you can verify your calculation against what your employer is taking out. If the numbers do not match, contact your payroll department to confirm they are using the current year's wage cap.

Frequently Asked Questions

What happens if I work for two employers in the same year?

Each employer withholds Social Security tax independently based on what you earn at that job. If your combined earnings exceed the wage cap, you will overpay Social Security tax. You recover the overpayment when you file your tax return — it reduces your tax bill or increases your refund. The IRS handles this automatically when you report all your W-2 forms.

Do I pay FICA taxes on tips?

Yes. Tips are considered wages and are subject to FICA taxes. Your employer should withhold Social Security and Medicare taxes on tips you report. If you receive cash tips that you do not report, you are still legally required to pay FICA taxes on them when you file your tax return.

Can I opt out of FICA taxes?

No. FICA taxes are mandatory for all employees and self-employed workers. There are no exemptions based on religion, age, or income level. If you are employed, your employer is required to withhold these taxes. If you are self-employed, you must pay them when you file your tax return.

Why do I see FICA taxes taken out if I will get Social Security later?

FICA taxes fund current Social Security and Medicare benefits for retirees, disabled workers, and their families — not just your own future benefits. The money you pay in now goes to people currently receiving benefits. Your future benefits are based on your earnings record and the age at which you claim, not on the total amount you paid in.

Is the additional Medicare tax permanent?

Yes. The additional 0.9 percent Medicare tax has no sunset date. It applies to all wages over $200,000 for single filers and $250,000 for married couples filing jointly. Unlike the Social Security portion, this additional tax has no wage cap and continues on all income above the threshold.