FICA tax is the Social Security and Medicare tax your employer takes from your paycheck

FICA stands for Federal Insurance Contributions Act. It is a federal payroll tax that funds two programs: Social Security (retirement, disability, and survivor benefits) and Medicare (health insurance for people 65 and older, and some younger people with disabilities). Your employer withholds FICA tax directly from your wages, and your employer also pays a matching amount on your behalf.

FICA appears as two separate line items on your pay stub: Social Security tax and Medicare tax. You cannot opt out of FICA if you are a W-2 employee. Self-employed people pay FICA through self-employment tax, which is calculated differently but funds the same programs.

Key Takeaways

  • FICA tax funds Social Security and Medicare, and your employer withholds it automatically from each paycheck.
  • Social Security tax is 6.2 percent of your wages (up to a yearly cap), and Medicare tax is 1.45 percent with no cap.
  • Your employer pays an equal amount in FICA tax on your behalf, so the total contribution is double what appears on your pay stub.
  • Self-employed workers pay both the employee and employer portions, totaling 15.3 percent for Social Security and Medicare combined.
  • FICA withholding does not change based on your tax filing status or number of dependents — it is the same for all workers.

How much FICA tax comes out of your paycheck

Social Security tax is 6.2 percent of your gross wages, but only up to a yearly earnings cap. For 2024, that cap is $168,600, meaning once you earn that much in a year, no more Social Security tax is withheld from your remaining paychecks. Medicare tax is 1.45 percent of your gross wages with no earnings cap — it applies to every dollar you earn.

If your income is high, you may also see an additional Medicare tax of 0.9 percent on wages above $200,000 (single filers) or $250,000 (married filing jointly). This extra tax was added in 2013 and appears as a separate line item on your pay stub.

Your employer withholds these amounts and sends them to the U.S. Treasury on your behalf. At the same time, your employer pays an equal FICA contribution — 6.2 percent for Social Security and 1.45 percent for Medicare — so the total FICA cost is actually double what you see deducted from your check.

The difference between FICA and income tax withholding

FICA tax and federal income tax withholding are separate deductions. FICA is a fixed percentage that goes to Social Security and Medicare. Income tax withholding is based on your W-4 form and depends on your filing status, number of dependents, and other income sources. You can adjust your income tax withholding by submitting a new W-4 to your employer, but you cannot change your FICA withholding — it is always the same percentage for all workers.

FICA also appears on your pay stub separately from federal income tax, state income tax (if your state has one), and local taxes. When you file your annual tax return, FICA taxes you paid are reported on your Form 1040, but they do not directly reduce your income tax bill the way some other deductions do.

How FICA taxes fund Social Security and Medicare

The Social Security portion of FICA (6.2 percent) funds retirement benefits, disability benefits, and survivor benefits. When you turn 62 or older, you can begin drawing Social Security retirement benefits based on your earnings history. If you become disabled before retirement age, you may receive Social Security Disability Insurance (SSDI). If you die, your family members may receive survivor benefits.

The Medicare portion of FICA (1.45 percent) funds hospital insurance (Part A), which covers inpatient hospital stays, skilled nursing facility care, and some home health services. Medicare Part B (medical insurance) and Part D (prescription drug coverage) have separate premiums that are not part of FICA withholding.

Both programs use a pay-as-you-go system: the FICA taxes you pay today fund benefits for current retirees and disabled workers, not a personal account in your name. Your FICA contributions establish your may be able to access and determine the amount of your future benefits.

Self-employment tax and FICA

If you are self-employed, you pay self-employment tax instead of having an employer withhold FICA. Self-employment tax is 15.3 percent total: 12.4 percent for Social Security (on net earnings up to the yearly cap) and 2.9 percent for Medicare (on all net earnings). This is higher than the employee portion because you pay both the employee and employer sides.

You calculate self-employment tax on Schedule SE (Form 1040) and pay it when you file your annual tax return or through quarterly estimated tax payments. You can deduct half of your self-employment tax as an adjustment to income on your Form 1040, which reduces your taxable income slightly.

What happens to FICA taxes after they are withheld

Your employer sends FICA taxes to the Internal Revenue Service (IRS) and the Social Security Administration (SSA) on a regular schedule — usually monthly or quarterly, depending on the size of the payroll. The SSA uses these records to track your earnings history and calculate your future Social Security benefits.

When you reach retirement age or become disabled, the SSA reviews your FICA contribution record to determine whether you are may have access to to benefits and how much you will receive. Your benefit amount is based on your 35 highest-earning years (for retirement) or your recent earnings (for disability). If you have not paid enough FICA taxes to may have access to, you will not receive benefits.

FICA tax and your Social Security statement

You can view your lifetime FICA contributions and estimated future benefits through your Social Security statement at ssa.gov. Create a my Social Security account to see your earnings record, verify that your employer reported your wages correctly, and get an estimate of your retirement, disability, and survivor benefits.

If you notice an error in your earnings record — such as wages that were not reported or were reported under the wrong name or Social Security number — contact the SSA to correct it. Errors can reduce your future benefits, so it is worth checking your record every few years.

Frequently Asked Questions

Can I get FICA taxes back if I did not earn enough to owe income tax?

No. FICA taxes are not refundable, even if you do not owe federal income tax. They fund Social Security and Medicare, not your income tax bill. If you overpaid income tax, you may receive a refund, but FICA withholding is separate and does not come back.

What if I work for multiple employers in the same year?

Each employer withholds Social Security tax up to the yearly cap. If your combined earnings exceed the cap, you may have overpaid Social Security tax. When you file your tax return, you can claim a credit for the overpayment on Form 1040, and the IRS will refund the excess.

Do I pay FICA tax on tips?

Yes. Tips are considered wages and are subject to FICA withholding. You must report tips to your employer, and they will withhold FICA tax on the reported amount. If you do not report tips, you may face penalties and interest.

Is FICA tax the same as payroll tax?

FICA is one type of payroll tax. Payroll tax is a broader term that includes FICA (Social Security and Medicare) plus federal income tax withholding, state income tax, and local taxes. All of these are deducted from your paycheck by your employer.