FICA is the federal tax that comes out of your paycheck for Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act. It is the law that requires your employer to take money from your paycheck and send it to the federal government. That money 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).

When you look at your pay stub, you will see FICA listed as a deduction. It comes out before you receive your paycheck. Your employer also pays a matching amount on your behalf — you do not see this, but it happens. Together, these two amounts (yours and your employer's) make up the total FICA contribution.

FICA is different from federal income tax, which is also deducted from your paycheck. Income tax goes to the general Treasury. FICA goes directly to Social Security and Medicare, and the amount you pay determines what you receive later.

Key Takeaways

  • FICA has two parts: 6.2% of your wages goes to Social Security, and 1.45% goes to Medicare, taken directly from your paycheck.
  • Your employer pays an equal amount (6.2% for Social Security, 1.45% for Medicare) that does not appear on your pay stub but counts toward your benefits.
  • Self-employed people pay both the employee and employer portions themselves, totaling 12.4% for Social Security and 2.9% for Medicare.
  • There is a wage cap on Social Security tax — once you earn above a certain amount in a year, you stop paying Social Security tax on additional income.
  • The money you pay into FICA now funds current retirees and Medicare beneficiaries; your own benefits later depend on your earnings record and age.

How much FICA comes out of your paycheck

The Social Security portion of FICA is 6.2% of your gross wages (the amount before any deductions). The Medicare portion is 1.45%. Together, that is 7.65% of your paycheck going to FICA.

However, Social Security tax has a wage cap. In 2024, you only pay Social Security tax on the first $168,600 of your annual wages. Once you earn above that amount, no more Social Security tax is taken from your paycheck for the rest of that year. Medicare tax has no cap — you pay 1.45% on all your wages, no matter how much you earn. Additionally, if your income is above certain thresholds (which vary by filing status), you pay an extra 0.9% Medicare tax on the excess.

Your employer withholds these amounts automatically. You cannot opt out of FICA — it is required by law if you are an employee earning wages.

How self-employed people pay FICA

If you are self-employed, you pay both the employee and employer portions of FICA yourself. This is called self-employment tax. You pay 12.4% for Social Security (up to the annual wage cap) and 2.9% for Medicare on your net self-employment income.

You calculate self-employment tax on Schedule SE (Form 1040) when you file your taxes. You can deduct half of your self-employment tax as a business expense on your tax return, which reduces your overall tax burden slightly. Self-employment tax is due when you file your annual return, though if you expect to owe a large amount, you may need to make quarterly estimated tax payments throughout the year.

What FICA money is used for

The Social Security portion of FICA (6.2% from employees, 6.2% from employers) funds the Social Security Trust Fund. This money pays retirement benefits to people 62 and older, disability benefits to workers who cannot work due to a medical condition, and survivor benefits to the spouses and children of deceased workers.

The Medicare portion of FICA (1.45% from employees, 1.45% from employers) funds Medicare Part A, which covers hospital stays, skilled nursing care, hospice, and some home health services. It does not cover doctor visits or prescription drugs — those are covered by other parts of Medicare that are funded differently.

The money you pay into FICA now does not sit in an account with your name on it. Instead, it funds benefits for current retirees and Medicare beneficiaries. When you retire or become may be able to access for Medicare, the FICA contributions from workers at that time will fund your benefits.

How FICA affects your future benefits

Your FICA contributions create an earnings record with the Social Security Administration. The amount of Social Security retirement benefit you receive is based on your highest 35 years of earnings. The more you earn (up to the wage cap) and the more years you work, the higher your benefit will be.

You must have worked and paid FICA taxes for at least 10 years (40 quarters) to receive your own Social Security retirement benefit. If you have not worked that long, you may still receive benefits as a spouse or survivor, depending on your situation.

For Medicare, paying FICA taxes for at least 10 years generally qualifies you for Medicare Part A without paying a premium when you turn 65. If you have not worked long enough, you can still enroll in Medicare at 65, but you will pay a monthly premium for Part A.

FICA versus income tax: what is the difference

FICA and federal income tax are two separate deductions from your paycheck, and they fund different programs. FICA (7.65% for most workers) funds Social Security and Medicare. Federal income tax funds the general operations of the federal government — defense, infrastructure, education, and thousands of other programs.

The amount of federal income tax withheld from your paycheck depends on the W-4 form you fill out when you start a job. You can adjust your withholding if you want more or less tax taken out. FICA, by contrast, is fixed by law — you cannot change it.

When you file your tax return, you report both FICA and income tax. If too much was withheld, you receive a refund. FICA taxes are also reported, but they are not refundable — you cannot get that money back. However, FICA taxes you paid are credited toward your Social Security and Medicare benefits.

What happens if you change jobs or have multiple jobs

If you change jobs during the year, your new employer will begin withholding FICA from your paycheck. There is no break or restart — FICA continues to be withheld from every paycheck you receive.

If you have multiple jobs in the same year, each employer withholds FICA independently. You will pay Social Security tax on all your wages until you reach the annual wage cap across all jobs combined. When you file your tax return, if you have overpaid Social Security tax (because you hit the cap at one job and then earned more at another), you can claim a credit for the overpayment.

Medicare tax is withheld on all your wages with no cap, so there is no overpayment issue unless your total income exceeds the threshold for the additional 0.9% Medicare tax.

Frequently Asked Questions

Can I get out of paying FICA taxes?

No. FICA is mandatory for all employees earning wages. The only exception is certain religious groups that have received a specific exemption from the IRS, and some government employees hired before certain dates. If you are self-employed, you must pay self-employment tax unless you fall into one of these narrow exemptions.

What is the FICA wage cap and why does it exist?

In 2024, the Social Security wage cap is $168,600. Once you earn above that amount, you stop paying Social Security tax on additional income for the rest of the year. The cap exists because Social Security benefits are calculated using a formula that replaces a higher percentage of lower earners' income than higher earners' income. The cap reflects this structure.

Do I get FICA taxes back when I file my return?

FICA taxes are not refundable — you cannot get that money back. However, if you overpaid Social Security tax (usually because you had multiple jobs and hit the wage cap), you can claim a credit on your tax return. Medicare tax overpayment cannot be credited; it is simply lost.

How do I check my FICA earnings record?

You can create an account at ssa.gov and view your Social Security earnings record online. This record shows how much you have earned each year and how much FICA tax was withheld. Review it for errors, especially if you have changed jobs frequently or worked under different names.

What if I did not pay FICA taxes for some years?

Years with no earnings or no FICA contributions count as zero-earning years in your Social Security calculation. Social Security uses your highest 35 years of earnings, so zero years lower your average. If you have fewer than 10 years of FICA contributions, you will not may have access to for your own retirement benefit, though you may may have access to as a spouse or survivor.