FICA taxes are Social Security and Medicare deductions taken from your paycheck

FICA stands for the Federal Insurance Contributions Act. It is the law that requires your employer to withhold money from your paycheck for two programs: Social Security and Medicare. These are not optional — if you work as an employee, FICA taxes come out automatically. The money goes into federal trust funds that pay benefits to retirees, disabled workers, and people on Medicare.

You will see FICA taxes listed separately on your pay stub. Your employer withholds the money and sends it to the U.S. Treasury on your behalf. If you are self-employed, you pay both the employee and employer portions yourself, which is called self-employment tax.

Key Takeaways

  • FICA taxes fund Social Security retirement benefits and Medicare health insurance for people 65 and older.
  • Your employer withholds 6.2% of your wages for Social Security and 1.45% for Medicare, and your employer matches both amounts.
  • Self-employed workers pay both the employee and employer share, totaling 15.3% of their net earnings.
  • There is a wage cap on Social Security tax — in 2024, you stop paying Social Security tax after earning $168,600, but Medicare tax continues on all income.
  • FICA taxes are separate from federal income tax and are deducted before income tax is calculated.

How much FICA tax comes out of your paycheck

If you are an employee, your employer withholds two separate FICA taxes. The Social Security tax is 6.2% of your gross wages. The Medicare tax is 1.45% of your gross wages. Together, that is 7.65% of what you earn before any other deductions.

Your employer also pays a matching amount — another 6.2% for Social Security and 1.45% for Medicare. You do not see this money come out of your check, but it is part of your total compensation. The employer sends both your portion and their portion to the federal government.

There is one important difference between the two taxes. Social Security tax only applies to the first $168,600 of your wages in 2024. Once you reach that amount in a calendar year, no more Social Security tax is withheld from your remaining paychecks. Medicare tax, however, has no wage cap — it continues on every dollar you earn. Additionally, if your income exceeds $200,000 as a single filer (or $250,000 if married filing jointly), an extra 0.9% Medicare tax is withheld.

The difference between FICA taxes and income tax

FICA taxes and federal income tax are two separate deductions. Many people confuse them because both come out of the same paycheck. Federal income tax is based on your tax bracket and filing status — the amount withheld depends on the W-4 form you fill out with your employer. FICA taxes are fixed percentages that do not change based on your income level or personal situation.

Another key difference is what the money funds. Federal income tax goes into the general Treasury and funds government operations like defense, infrastructure, and federal agencies. FICA taxes go specifically into the Social Security and Medicare trust funds. You can think of FICA as a dedicated payroll tax for those two programs.

How self-employed workers pay FICA taxes

If you are self-employed, you do not have an employer to withhold FICA taxes for you. Instead, you pay self-employment tax, which is the combined employee and employer share of FICA. That totals 15.3% — 12.4% for Social Security and 2.9% for Medicare.

You calculate self-employment tax on your net earnings from self-employment (your business income minus business expenses). You pay it when you file your annual tax return, usually by making quarterly estimated tax payments throughout the year. The IRS provides Schedule SE to help you calculate the amount. You can deduct half of your self-employment tax as a business expense on your income tax return, which reduces your overall tax burden slightly.

Where FICA taxes go and who receives the benefits

The Social Security portion of FICA taxes (6.2% from employees, 6.2% from employers) funds retirement benefits for workers 62 and older, disability benefits for workers who cannot work due to a medical condition, and survivor benefits for the families of deceased workers. When you reach your full retirement age — which ranges from 66 to 67 depending on your birth year — you become may be able to access to receive monthly Social Security payments based on your earnings history.

The Medicare portion (1.45% from employees, 1.45% from employers) funds health insurance for people 65 and older. It covers hospital stays, doctor visits, and prescription drugs. Some people become may be able to access for Medicare before 65 if they have been receiving Social Security disability benefits for 24 months or have end-stage renal disease.

The money you pay in FICA taxes is not set aside in an individual account with your name on it. Instead, it goes into a shared trust fund. Current workers' FICA taxes pay benefits to current retirees and beneficiaries. When you retire, future workers' FICA taxes will help pay your benefits.

FICA tax limits and wage caps explained

The Social Security wage base limit changes each year. In 2024, you pay Social Security tax on earnings up to $168,600. If you earn $200,000 in a year, you only pay the 6.2% Social Security tax on the first $168,600 — the remaining $31,400 is not subject to Social Security tax. This cap exists because Social Security benefits are designed to replace a portion of your pre-retirement income, not to provide unlimited benefits.

Medicare tax has no wage cap. You pay 1.45% on every dollar you earn, no matter how much you make. Additionally, if your income exceeds $200,000 (single) or $250,000 (married filing jointly), you pay an additional 0.9% Medicare tax on the excess income. This extra tax was added in 2013 to help fund the Medicare program.

Self-employed workers explore these same rules to their net self-employment income. The Social Security wage base limit applies to self-employment earnings, and the Medicare tax continues on all income with the same additional 0.9% threshold.

Why FICA taxes matter for your retirement and healthcare

FICA taxes are the primary way you build may be able to access for Social Security and Medicare. The more you earn and pay into these programs, the higher your future benefits will be. Social Security calculates your benefit based on your 35 highest-earning years, so consistent FICA tax payments throughout your working life directly affect the monthly check you receive in retirement.

For Medicare, paying FICA taxes for at least 10 years (40 quarters) makes you may be able to access for Part A (hospital insurance) at age 65 with no monthly premium. If you do not have 40 quarters of FICA contributions, you can still buy into Medicare, but you will pay a higher premium. Understanding how FICA taxes work helps you plan for retirement and know what benefits to expect.

Frequently Asked Questions

Can I opt out of paying FICA taxes?

No. FICA taxes are mandatory for all employees and self-employed workers. The only exceptions are certain religious groups that have been granted exemptions and some government employees hired before specific dates who are covered by alternative pension systems instead.

What happens to FICA taxes if I change jobs?

Your FICA tax record follows you. Each employer withholds FICA taxes and reports your earnings to the Social Security Administration. Your lifetime earnings are tracked under your Social Security number, so changing jobs does not reset or lose your FICA contributions. The wage cap for Social Security tax applies per calendar year across all employers, so if you work multiple jobs, you could overpay Social Security tax if your combined earnings exceed the limit.

Do I get FICA taxes back if I do not use Social Security or Medicare?

No. FICA taxes are not refundable. Even if you pass away before reaching retirement age or decide not to claim Social Security benefits, the money you paid in does not come back to you or your estate. However, your family may be may be able to access for survivor benefits based on your earnings record.

How do I check how much FICA tax I have paid?

You can create a free account at ssa.gov and view your Social Security earnings record. This shows your reported income for each year and estimates your future benefits. You can also request a paper statement by calling the Social Security Administration at 1-800-772-1213.

Will FICA tax rates change in the future?

Congress would need to pass new legislation to change FICA tax rates. The current rates have been in place since 1990 for Social Security and 1966 for Medicare. While there has been discussion about adjusting rates or the wage cap to address long-term funding, any changes would require legislative action.