FICA is the tax that funds Social Security and Medicare
FICA stands for Federal Insurance Contributions Act. It is a payroll tax that comes out of your paycheck every time you are paid. The money goes to two programs: Social Security, which provides retirement and disability benefits, and Medicare, which covers hospital insurance for people 65 and older.
When you look at your pay stub, you will see FICA listed as a deduction. Your employer also pays a matching amount on your behalf — you do not see this come out of your check, but it is part of what your employer owes to the government. Together, your portion and your employer's portion fund these two federal insurance programs.
FICA is separate from income tax. Income tax goes to the general fund and pays for roads, defense, and other government operations. FICA is dedicated solely to Social Security and Medicare, and the money is held in trust funds rather than mixed into general revenue.
Key Takeaways
- FICA tax has two parts: 6.2 percent of your wages goes to Social Security, and 1.45 percent goes to Medicare, taken directly from your paycheck.
- Your employer pays an equal amount on top of your salary, so the total FICA contribution is double what you see deducted.
- You only pay FICA on wages up to a certain amount each year for Social Security, but Medicare tax has no income cap.
- Self-employed people pay both the employee and employer portions themselves, which is called self-employment tax.
- The money you pay in FICA is not held in a personal account — it funds current beneficiaries, and future benefits depend on the program's solvency.
How much FICA comes out of your paycheck
The Social Security portion of FICA is 6.2 percent of your gross wages. The Medicare portion is 1.45 percent. Combined, that is 7.65 percent of your paycheck before any other deductions.
However, the Social Security tax only applies to wages up to a certain threshold, which changes each year. In 2024, you pay Social Security tax on the first $168,600 of wages. Once you earn above that amount in a calendar year, no more Social Security tax is taken out. Medicare tax, by contrast, has no income limit — you pay 1.45 percent on every dollar you earn, no matter how much.
If you earn more than $200,000 as a single filer (or $250,000 if married filing jointly), an additional 0.9 percent Medicare tax applies to the income above that threshold. This is sometimes called the Net Investment Income Tax or the Additional Medicare Tax, and it was added in 2013.
What your employer pays and why it matters
Your employer must pay FICA tax equal to what you pay: 6.2 percent for Social Security and 1.45 percent for Medicare. This is a cost to the employer separate from your salary. If you earn $50,000 a year, your employer pays an additional $3,825 in FICA taxes on your behalf.
This employer contribution does not appear on your pay stub because it does not come out of your paycheck. However, it is part of your total compensation cost to the employer. Some employers factor this into salary negotiations, and it is one reason why your take-home pay is lower than your stated salary.
Self-employed people do not have an employer to split the cost with. Instead, they pay both portions themselves through self-employment tax, which totals 15.3 percent. They can deduct half of this amount when calculating their income tax, which provides some offset.
How FICA money is used
Social Security tax funds retirement benefits, survivor benefits (paid to family members if a worker dies), and disability benefits. Medicare tax funds hospital insurance (Part A), which covers inpatient hospital stays, skilled nursing care, and hospice.
The money does not sit in a personal account with your name on it. Instead, current FICA contributions pay for current beneficiaries. When you retire, future workers' FICA contributions will fund your benefits. This is called a pay-as-you-go system.
Both trust funds publish annual reports on their solvency. Social Security's trust fund is projected to be depleted in the mid-2030s if no changes are made, at which point incoming revenue would cover only about 80 percent of scheduled benefits. Medicare's Hospital Insurance Trust Fund has a different timeline. These projections change as demographics and economic conditions shift.
Why FICA appears on every paycheck
FICA is mandatory for nearly all workers in the United States. If you are employed and earn wages, your employer must withhold FICA tax and send it to the Internal Revenue Service. There is no option to opt out, even if you do not plan to use Social Security or Medicare.
The only common exceptions are certain government employees who are part of alternative retirement systems, some religious groups that have received exemptions, and nonresident aliens on certain visas. Most people who work in the United States pay FICA from their first paycheck onward.
FICA withholding begins the moment you earn wages, regardless of your age. Even teenagers working part-time jobs pay FICA tax. The money you pay in now builds a record of earnings that determines your future Social Security benefit amount.
The difference between FICA and income tax
FICA and income tax are two separate deductions on your pay stub. Income tax is withheld based on the W-4 form you fill out when you start a job, and the amount depends on your filing status, number of dependents, and other factors. FICA is a flat percentage with no variation based on personal circumstances.
Income tax goes into the general Treasury and funds all federal spending. FICA goes into dedicated trust funds for Social Security and Medicare only. Income tax is progressive — higher earners pay a higher percentage — while FICA is regressive because the Social Security portion has an income cap.
You can adjust how much income tax is withheld by changing your W-4, but you cannot change your FICA withholding. It is the same percentage for everyone, with the exception of the additional Medicare tax for high earners.
What happens to your FICA record over time
The Social Security Administration keeps a record of all FICA taxes you pay under your Social Security number. This record is called your earnings record, and it determines how much you will receive in Social Security benefits when you retire.
Social Security benefits are based on your 35 highest-earning years. If you have fewer than 35 years of earnings, zeros are counted for the missing years, which lowers your benefit. You need at least 40 credits of earnings to be may be able to access for retirement benefits; in 2024, you earn one credit for every $1,730 in wages, up to four credits per year.
You can view your earnings record online through your Social Security account at ssa.gov. It is worth checking periodically to make sure your employer reported your wages correctly, because errors can reduce your future benefits.
Frequently Asked Questions
Can I get my FICA taxes back if I do not use Social Security or Medicare?
No. FICA is a mandatory tax, and there is no refund or opt-out option. Even if you do not plan to claim Social Security or Medicare, you still pay FICA. The money funds current beneficiaries, not a personal account you control.
What if I work for multiple employers in the same year?
Each employer withholds FICA based on your wages with them. If your combined wages exceed the Social Security wage base (the income cap), you may have overpaid Social Security tax. You can claim a refund of the overpayment when you file your income tax return.
Do I pay FICA on tips and bonuses?
Yes. FICA applies to all wages, including tips, bonuses, and commissions. Your employer should withhold FICA on these amounts just as they do on your regular salary.
What is self-employment tax, and how is it different from FICA?
Self-employment tax is what self-employed people pay instead of having an employer withhold FICA. It covers both the employee and employer portions, totaling 15.3 percent. You pay it when you file your income tax return, and you can deduct half of it as a business expense.
Will Social Security still be around when I retire?
Social Security will continue to exist, but the trust fund is projected to be depleted in the mid-2030s. At that point, incoming FICA revenue would cover roughly 80 percent of scheduled benefits unless Congress changes the law. Congress may raise the income cap, increase the tax rate, raise the retirement age, or reduce benefits.