FICA tax is calculated as a percentage of your gross wages, taken out before you see your paycheck
FICA stands for Federal Insurance Contributions Act. The government uses it to fund Social Security and Medicare. Your employer calculates how much you owe based on your total earnings for the pay period, then deducts it from your paycheck. The rate is fixed by federal law and does not change based on your income level or how many dependents you have.
The calculation happens the same way whether you earn $30,000 a year or $300,000 a year — at least until you hit the Social Security wage cap, which changes each year. For 2024, that cap is $168,600. Medicare has no cap, so you pay that percentage on every dollar you earn.
Key Takeaways
- Social Security tax is 6.2% of your wages up to the annual wage cap ($168,600 in 2024), and your employer pays an equal 6.2%.
- Medicare tax is 1.45% of all your wages with no upper limit, and your employer pays an equal 1.45%.
- If you earn over $200,000 as a single filer (or $250,000 married filing jointly), you pay an additional 0.9% Medicare tax on the amount above that threshold.
- Your employer withholds FICA from your paycheck and sends it to the IRS; you see the deduction on your pay stub.
- Self-employed people pay both the employee and employer portions, totaling 15.3% for Social Security and Medicare combined.
The two parts of FICA: Social Security and Medicare
FICA has two separate components, each with its own rate and rules. Social Security tax is 6.2% of your wages, but only on earnings up to the annual wage cap. In 2024, once you have earned $168,600, your employer stops withholding Social Security tax for the rest of that year. This cap increases each year based on wage growth.
Medicare tax is 1.45% of all your wages, with no cap. You pay it on your first dollar and your last dollar, no matter how much you earn. Your employer also withholds an equal 1.45%. If your income crosses certain thresholds — $200,000 for single filers, $250,000 for married filing jointly — you owe an additional 0.9% Medicare tax on the amount above that threshold. This extra tax is sometimes called the Additional Medicare Tax.
Combined, the standard FICA rate is 7.65% (6.2% + 1.45%), which your employer deducts from your paycheck. Your employer pays an equal 7.65% on your behalf, though you do not see that amount — it is a separate cost to them.
How the Social Security wage cap works
The Social Security wage cap exists because Social Security benefits are capped — the program replaces a percentage of your income up to a maximum monthly benefit, not a percentage of every dollar you earn. The wage cap is adjusted each year to keep pace with average wage growth. In 2023 it was $160,200; in 2024 it is $168,600; in 2025 it will be $168,600 again (the Social Security Administration announced no increase for 2025).
Once you reach the cap in a calendar year, your employer stops withholding Social Security tax. If you change jobs mid-year and your new employer does not know you already hit the cap at your old job, you may overpay. You can claim the overpayment as a credit on your tax return, but it requires you to file taxes even if you would not otherwise.
Medicare has no wage cap. You pay 1.45% on every dollar, and if you earn above the income thresholds, you pay the additional 0.9% on the excess.
The Additional Medicare Tax for higher earners
If your income exceeds $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately), you owe an additional 0.9% Medicare tax on the amount above your threshold. This is withheld from your paycheck if you are an employee, or paid when you file your tax return if you are self-employed.
The threshold is based on your filing status and does not adjust for dependents or other factors. If you are married filing jointly and earn $260,000 combined, you owe the extra 0.9% on $10,000 ($260,000 minus $250,000). That is $90 in additional Medicare tax.
Your employer withholds this based on the W-4 you filed with them. If you have multiple jobs or a spouse who also works, you may need to adjust your withholding to avoid underpaying or overpaying this tax.
What appears on your pay stub
Your pay stub shows FICA deductions broken into two lines: one for Social Security and one for Medicare. You will see the gross amount (your pay before deductions), then the FICA amounts subtracted, then your net pay (what you actually receive). The pay stub also shows year-to-date totals, so you can track whether you have hit the Social Security wage cap.
If you are subject to the Additional Medicare Tax, it may appear as a separate line item, or it may be rolled into the regular Medicare line. Check your pay stub or ask your payroll department if you are unsure whether the additional tax is being withheld.
Your employer is required to send FICA withholdings to the IRS on your behalf. You do not send it yourself — it comes out of your paycheck automatically. At the end of the year, your employer reports what they withheld on your W-2 form.
How self-employed people calculate FICA
If you are self-employed, you pay both the employee and employer portions of FICA, totaling 15.3% (12.4% for Social Security up to the wage cap, plus 2.9% for Medicare). You calculate this on your net self-employment income (your business income minus business expenses) when you file your tax return.
Self-employed people pay FICA through self-employment tax, reported on Schedule SE of your tax return. You can deduct half of your self-employment tax as a business expense, which reduces your taxable income. The Social Security wage cap still applies — you only pay the 12.4% portion on net earnings up to $168,600 in 2024.
If your net self-employment income is below $400, you do not owe self-employment tax. If you have both W-2 wages and self-employment income, the Social Security wage cap applies to your combined earnings, not each source separately.
FICA withholding and your tax return
FICA withholding is separate from income tax withholding. You may owe income tax, owe nothing, or receive a refund depending on your total income and deductions — but FICA is withheld regardless. It funds Social Security and Medicare, not the general Treasury.
When you file your tax return, the IRS compares what you actually owed in FICA to what your employer (or you, if self-employed) withheld. If you overpaid — for example, because you hit the Social Security wage cap and overpaid at a second job — you receive a credit. If you underpaid, you owe the difference.
Most people do not think about FICA on their tax return because the withholding is usually correct. But if you have multiple jobs, are self-employed, or earn above the Additional Medicare Tax threshold, it is worth reviewing your withholding to make sure you are not surprised at tax time.
Frequently Asked Questions
Why do I pay FICA if I might not collect Social Security?
FICA funds Social Security and Medicare, which are insurance programs. You pay in during your working years; if you become disabled or reach retirement age, you receive benefits. Medicare covers you at 65 regardless of your earnings history. Social Security also pays survivor benefits to your family if you die. You are not paying for a may provide of return — you are paying for insurance coverage.
What happens if I overpay Social Security tax at two jobs?
If you work two jobs and your combined earnings exceed the wage cap, you may overpay Social Security tax. Your employers do not coordinate with each other, so each may withhold the full 6.2% until you hit the cap at that job. When you file your tax return, you claim the overpayment as a credit and receive it back. You must file a return to claim this credit, even if you would not otherwise owe taxes.
Does FICA apply to all income?
FICA applies to wages and self-employment income. It does not apply to investment income, interest, dividends, or capital gains. Some types of employment are exempt — certain government employees, some religious workers, and nonresident aliens on student visas do not pay FICA. Ask your employer or a tax professional if you think your situation might be different.
Can I opt out of FICA?
No. FICA is mandatory for all covered employees and self-employed people. You cannot choose not to pay it, and your employer cannot choose not to withhold it. The only way to avoid FICA is to have no earned income.
How do I know if the Additional Medicare Tax is being withheld correctly?
Review your pay stub to see if the additional 0.9% is being withheld. If you have one job and your income is below the threshold for your filing status, it should not be withheld. If you have multiple jobs or a spouse who works, coordinate with your employer to make sure the withholding is correct across all jobs combined. You can adjust your W-4 if needed.