FICA tax is the Social Security and Medicare tax withheld from your paycheck

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 each paycheck and sends it to the federal government.

You will see FICA broken into two separate line items on your pay stub: Social Security tax and Medicare tax. Both are mandatory if you work as an employee. Self-employed people pay FICA too, though they handle it differently at tax time.

Key Takeaways

  • FICA tax funds Social Security and Medicare, and your employer withholds it automatically from your paycheck.
  • Social Security tax is 6.2% of your wages (up to a yearly cap), and Medicare tax is 1.45% with no cap.
  • Your employer also pays an equal amount of FICA tax on your behalf, though you do not see this on your pay stub.
  • Self-employed workers pay both the employee and employer share, totaling 15.3% for Social Security and Medicare combined.
  • FICA withholding appears on your W-2 form at the end of the year and counts toward your Social Security record.

How much FICA tax comes out of your paycheck

Social Security tax is 6.2% of your gross wages, but only up to a yearly earnings cap. The cap changes each year — in 2024 it was $168,600, meaning once you earn that much in a calendar year, no more Social Security tax is withheld. Medicare tax is 1.45% of your gross wages with no cap, so it continues no matter how much you earn.

If your income is above $200,000 (or $250,000 if married filing jointly), an additional 0.9% Medicare tax applies to the amount over that threshold. This is sometimes called the Net Investment Income Tax or high-income Medicare tax, and it also has no cap.

Your employer withholds these amounts and sends them to the IRS. You will see the total withheld listed separately on your pay stub as "Social Security" and "Medicare" or sometimes as "FICA."

Your employer pays FICA tax too

For every dollar of FICA tax withheld from your paycheck, your employer pays an equal amount on your behalf. This is called the employer share. You do not see this money deducted from your pay — it is a separate cost to your employer — but it counts toward the total FICA contributions made in your name.

The employer share is the same rate: 6.2% for Social Security (up to the yearly cap) and 1.45% for Medicare. So the total FICA contribution on your wages is 15.3% when you add the employee and employer shares together.

How FICA tax builds your Social Security record

FICA withholding is not just a tax — it is a record of work credits that determine your Social Security benefits later. Each quarter you earn a certain amount (the threshold changes yearly), you earn one work credit, up to four per year. To receive Social Security retirement benefits, you typically need 40 work credits, which takes about 10 years of work.

The amount of Social Security tax you pay does not directly determine your benefit amount. Instead, Social Security calculates your benefit based on your 35 highest-earning years. The more you earned (and thus the more FICA you paid) during those years, the higher your benefit will be.

Self-employed workers and FICA tax

If you are self-employed, you pay FICA tax through Self-Employment Tax on your federal tax return. You pay both the employee share (6.2% Social Security, 1.45% Medicare) and the employer share (another 6.2% and 1.45%), for a total of 15.3%. You calculate this on Schedule SE and report it on Form 1040.

Self-employed workers can deduct half of their self-employment tax as a business expense on their tax return, which reduces their taxable income. This deduction roughly offsets the fact that they pay both shares, but they still owe the full 15.3% in actual tax.

Where FICA tax money goes

Social Security tax funds the Social Security Trust Fund, which pays retirement benefits to people 62 and older, disability benefits to workers under 65 who cannot work, and survivor benefits to the families of deceased workers. Medicare tax funds the Hospital Insurance Trust Fund (Part A), which covers hospital stays, skilled nursing, hospice, and home health care.

These are separate from income tax. FICA is a dedicated payroll tax that goes into specific trust funds, not into the general Treasury. This is why you see it listed separately on your pay stub and on your tax forms.

FICA tax on your W-2 and tax return

At the end of each year, your employer sends you a W-2 form showing how much FICA tax was withheld. Box 4 shows Social Security tax withheld, and Box 6 shows Medicare tax withheld. These amounts are informational — you do not pay additional FICA on your tax return. The withholding is final.

If you had multiple jobs in one year, you may have overpaid Social Security tax (since each employer withholds up to the yearly cap independently). You can claim a refund of the overpayment on your tax return. Medicare tax overpayment is handled differently and usually requires you to adjust your withholding with your employer for the following year.

Frequently Asked Questions

Why do I have to pay FICA tax if I might not use Social Security?

FICA is a mandatory payroll tax for all employees and self-employed workers. It funds not just retirement benefits but also disability and survivor benefits. Even if you do not plan to claim retirement benefits, your FICA contributions help support these other programs, and your family members may be may have access to to benefits based on your work record if you become disabled or pass away.

Can I opt out of FICA tax?

No, FICA is mandatory for nearly all workers. A few exceptions exist — some religious groups and certain government employees have limited exemptions — but the vast majority of employees and self-employed people must pay. You cannot choose to skip FICA withholding.

What happens to FICA tax if I change jobs?

FICA withholding continues with each new employer. Your Social Security record accumulates all the FICA you pay across different jobs in the same year. If you hit the Social Security wage cap with one employer and then change jobs, your new employer will start withholding Social Security tax again (since they do not know what you earned elsewhere). You can claim the overpayment back on your tax return.

Is FICA tax the same as income tax?

No. FICA tax and income tax are separate. FICA funds Social Security and Medicare specifically. Income tax funds the general operations of the federal government. Both are withheld from your paycheck, but they go to different places and are calculated differently.

Do I pay FICA tax on tips and bonuses?

Yes. FICA tax applies to all wages, including tips, bonuses, commissions, and most other compensation. Your employer withholds FICA on the full amount of your gross pay. The only common exceptions are certain fringe benefits like health insurance premiums paid through a cafeteria plan.