FICA tax is the money taken from your paycheck for Social Security and Medicare
FICA stands for Federal Insurance Contributions Act. It is a 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 from every paycheck, and you pay a matching amount as an employee — meaning the cost is split between you and your employer.
FICA tax is separate from income tax. Income tax goes to the general Treasury and funds federal operations. FICA tax goes directly into two trust funds managed by the Social Security Administration and the Centers for Medicare & Medicaid Services. You cannot opt out of FICA tax if you are a W-2 employee; it is mandatory.
The amount withheld depends on your gross pay and the current tax rates, which Congress can change. For 2024, the employee portion is 6.2% for Social Security and 1.45% for Medicare, for a total of 7.65%. Your employer pays an equal 7.65%, bringing the total FICA cost to 15.3% of your wages.
Key Takeaways
- FICA tax funds Social Security and Medicare, and your employer withholds it automatically from your paycheck.
- The employee portion is 7.65% of gross pay (6.2% Social Security, 1.45% Medicare), and your employer matches this amount.
- Social Security tax has a wage cap — in 2024, you only pay it on earnings up to a set limit, but Medicare tax has no cap.
- Self-employed people pay both the employee and employer portions (15.3% total) through self-employment tax, which is calculated on Schedule SE.
- FICA taxes fund your future benefits; the amount you pay affects how much you receive in Social Security retirement or disability benefits later.
How FICA tax is split between Social Security and Medicare
The 7.65% you pay as an employee breaks into two parts. The first 6.2% goes to Social Security, which pays retirement benefits, disability benefits (SSDI), and survivor benefits to your family if you die. The remaining 1.45% goes to Medicare Part A, which covers hospital stays, skilled nursing care, and hospice.
Social Security tax has a wage cap. In 2024, you only pay Social Security tax on the first $168,600 of your annual earnings. Once you reach that limit in a calendar year, your employer stops withholding the 6.2% for the rest of the year. Medicare tax, by contrast, has no wage cap — you pay 1.45% on all earnings, no matter how high your income is.
High earners pay an additional 0.9% Medicare tax on wages above $200,000 (single filers) or $250,000 (married filing jointly). This extra tax was added in 2013 and goes into the Medicare trust fund. Your employer withholds it the same way as regular Medicare tax.
Why FICA tax matters for your future benefits
FICA taxes are not savings that sit in an account with your name on it. Instead, the money you pay in goes to current beneficiaries — retirees, disabled workers, and their families. In return, you build a record of earnings that determines your own future benefits.
Social Security tracks your FICA contributions over your working life. When you reach full retirement age (between 66 and 67 for most people born after 1954), you can claim retirement benefits based on your earnings record. The more you earned and paid in FICA tax, the higher your monthly benefit. If you become disabled before retirement age, you can claim disability benefits based on the same earnings record.
Medicare may be able to access is tied to age and FICA contributions. Most people become may be able to access for Medicare at 65 if they or their spouse paid FICA tax for at least 10 years (40 quarters). Some younger people with disabilities or end-stage renal disease can may have access to sooner. Your FICA contributions do not directly determine your Medicare premiums the way they do with Social Security, but they do establish your may be able to access.
Self-employed workers and FICA tax
If you are self-employed, you pay FICA tax through self-employment tax, calculated on Schedule SE of your tax return. Because you are both employee and employer, you pay the full 15.3% — 12.4% for Social Security and 2.9% for Medicare. You calculate this on your net self-employment income (your business income minus business expenses).
Self-employed people pay self-employment tax once a year when they file their tax return, though many make quarterly estimated tax payments to avoid a large bill in April. You can deduct half of your self-employment tax as a business expense on your return, which reduces your taxable income slightly.
The Social Security wage cap applies to self-employed people the same way it does to W-2 employees. In 2024, you only pay the 12.4% Social Security portion on the first $168,600 of net self-employment income. The 2.9% Medicare tax (or 3.8% if you earn above the threshold) applies to all net self-employment income.
FICA tax withholding on your paycheck
Your employer calculates FICA tax withholding based on your gross pay — the total amount you earn before any deductions. The withholding happens automatically; you do not have to do anything. Your pay stub shows the amount withheld for Social Security and Medicare separately, so you can see exactly how much went to each program.
If you have multiple jobs, you may overpay Social Security tax in a single year. This happens because each employer withholds 6.2% on all your earnings at that job, up to the wage cap, without knowing about your other jobs. When you file your tax return, you can claim a credit for the overpayment, and the IRS will refund it to you.
You cannot reduce or avoid FICA tax withholding by claiming exemptions on your W-4 form the way you can with income tax. FICA tax is mandatory for all W-2 employees, and the rate is set by law.
How FICA tax rates and the wage cap change
Congress sets the FICA tax rate and the Social Security wage cap. The rates have remained at 6.2% for Social Security and 1.45% for Medicare since 1990, though Congress can change them. The wage cap, however, adjusts every year based on average wage growth in the economy. In 2023 it was $160,200; in 2024 it is $168,600.
The Social Security trust fund is projected to be depleted around 2034 if no changes are made. At that point, incoming FICA tax would only cover about 80% of scheduled benefits. Congress may raise the tax rate, raise or eliminate the wage cap, reduce benefits, or change the retirement age to address this shortfall, but no changes have been enacted yet.
FICA tax for non-citizens and visa holders
Most people working in the United States on a visa must pay FICA tax the same way U.S. citizens do. H-1B workers, L-1 workers, and most other visa categories are subject to FICA withholding on their wages. Some visa holders, such as certain F-1 students on optional practical training (OPT) or J-1 exchange visitors, may be exempt from Social Security and Medicare tax under tax treaties, but this depends on their visa type and country of citizenship.
Undocumented workers who have a Social Security number and are paid as W-2 employees have FICA tax withheld from their paychecks. The money goes into the Social Security trust fund, but they cannot claim benefits based on those contributions unless they later become lawful permanent residents or citizens.
Frequently Asked Questions
What happens to FICA tax if I change jobs?
Your new employer starts withholding FICA tax from your first paycheck. If you reach the Social Security wage cap before the end of the year, your employer stops withholding the 6.2% Social Security tax, but continues withholding Medicare tax. When you file your tax return, you report all your W-2 forms, and the IRS credits all your FICA payments toward your Social Security and Medicare records.
Can I get a refund of FICA tax I already paid?
You cannot get a refund of FICA tax unless you overpaid Social Security tax due to having multiple jobs in the same year. In that case, you claim the overpayment on your tax return and receive a refund. Medicare tax overpayments are not refundable. If you paid FICA tax on wages you should not have been taxed on, you may be able to file an amended return or claim a refund, but this is rare.
Do I pay FICA tax on tips?
Yes. Tips are considered wages for FICA tax purposes. Your employer withholds FICA tax on tips you report to them, and you are responsible for reporting all tips to your employer. If you do not report tips, you may owe FICA tax when you file your return, plus penalties and interest.
What if my employer did not withhold FICA tax from my paycheck?
Contact your employer and ask them to correct the withholding. If they refuse or go out of business, you may owe FICA tax when you file your return. You can also contact the IRS or your state labor department for help recovering unpaid wages and taxes.
Does FICA tax count toward my income tax return?
No. FICA tax and income tax are separate. FICA tax does not reduce your taxable income for federal income tax purposes. However, FICA tax is withheld from your paycheck before you receive it, so it reduces the amount of take-home pay you get, even though it does not lower your tax bill.