FICA is made up of four separate taxes, not one

FICA stands for the Federal Insurance Contributions Act. It is not a single tax — it is four different taxes that your employer withholds from your paycheck. Two of them fund Social Security. Two fund Medicare. Your employer also pays a matching amount for each one, though you do not see that money leave your check.

Understanding what each part does helps you read your pay stub and know where your money goes. The four parts are Social Security employee tax, Social Security employer tax, Medicare employee tax, and Medicare employer tax. The employee portions show up as deductions on your paycheck. The employer portions are paid separately by your employer to the federal government.

Key Takeaways

  • Social Security tax is 6.2 percent of your wages, and your employer pays another 6.2 percent, for a total of 12.4 percent.
  • Medicare tax is 2.9 percent of your wages, and your employer pays another 2.9 percent, for a total of 5.8 percent.
  • High earners pay an additional 0.9 percent Medicare tax on income above a threshold that varies by filing status.
  • Self-employed people pay both the employee and employer portions themselves, which is why their FICA rate is roughly double.

Social Security tax: 6.2 percent from you, 6.2 percent from your employer

Social Security tax funds the Social Security program, which pays retirement benefits, disability benefits, and survivor benefits. The employee portion is 6.2 percent of your gross wages. Your employer withholds this from your paycheck and sends it to the federal government. Your employer also pays 6.2 percent on your behalf — you do not see this amount, but it counts toward your Social Security record.

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. That cap changes each year. In 2024, the cap was $168,600, meaning you paid Social Security tax on the first $168,600 you earned and nothing on income above that. Your employer stops withholding at that point too. This cap does not apply to Medicare tax.

Medicare tax: 2.9 percent from you, 2.9 percent from your employer

Medicare tax funds the Medicare program, which provides health insurance to people age 65 and older and to some younger people with disabilities. The employee portion is 2.9 percent of your gross wages, with no wage cap — you pay it on every dollar you earn. Your employer withholds this from your paycheck and also pays 2.9 percent on your behalf.

Unlike Social Security tax, Medicare tax continues on all your income no matter how much you earn. If you earn $200,000 in a year, you pay Medicare tax on the full $200,000. This is why Medicare tax is sometimes called "unlimited" — there is no ceiling where it stops.

Additional Medicare tax for high earners

If you earn above a certain income threshold, you pay an extra 0.9 percent Medicare tax on the income above that threshold. This is called the Additional Medicare Tax. The threshold depends on your filing status: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. These thresholds do not change from year to year.

Your employer withholds this additional tax if your income exceeds the threshold. Unlike the regular Medicare tax, your employer does not pay a matching portion of the Additional Medicare Tax — only you pay it. You will see this as a separate line item on your pay stub if it applies to you.

How self-employed people pay FICA

If you are self-employed, you pay both the employee and employer portions of FICA yourself through self-employment tax. This means you pay 12.4 percent for Social Security (instead of 6.2 percent) and 5.8 percent for Medicare (instead of 2.9 percent), for a combined rate of roughly 18.2 percent before the Additional Medicare Tax.

You calculate self-employment tax on your net business income — your revenue minus your business expenses. You pay it when you file your tax return, usually quarterly through estimated tax payments. You can deduct half of your self-employment tax as a business expense, which lowers your taxable income. The Social Security wage cap still applies, so once your net self-employment income reaches the cap, you stop paying the 12.4 percent Social Security portion on additional income.

Where FICA money goes

FICA taxes are not held in a personal account with your name on it. Instead, they go into two trust funds: the Social Security Trust Fund and the Medicare Trust Fund. Current workers' FICA taxes pay benefits to current retirees and disabled people. When you retire or become disabled, your benefits come from the FICA taxes paid by workers at that time.

The Social Security Administration and the Centers for Medicare and Medicaid Services track your earnings history based on your Social Security number. Your earnings record determines how much you will receive in benefits later. You can view your earnings record online through your Social Security account or by requesting a statement from the Social Security Administration.

Reading FICA on your pay stub

Your pay stub shows the employee portions of FICA as separate line items. You will typically see "Social Security" or "OASDI" (Old Age, Survivors, and Disability Insurance), "Medicare," and possibly "Additional Medicare Tax" if you earn above the threshold. Each line shows the amount withheld from that paycheck.

Add up all the FICA withholdings from your paychecks throughout the year, and that is the total you paid in FICA taxes for that year. This amount appears on your W-2 form in boxes 4 (Social Security tax withheld) and 6 (Medicare tax withheld). You do not get this money back unless you overpaid — for example, if you worked for two employers and both withheld Social Security tax after you hit the wage cap.

Frequently Asked Questions

Why do I pay FICA if I might not collect Social Security?

FICA funds not just retirement benefits but also disability and survivor benefits. If you become disabled before retirement age, you may receive Social Security Disability Insurance. If you die, your family members may receive survivor benefits. Additionally, FICA is a mandatory federal tax — the law requires employers to withhold it regardless of whether you plan to collect benefits later.

Can I opt out of paying FICA?

No. FICA withholding is required by federal law for all employees and self-employed people. The only exceptions are certain religious groups that have received a formal exemption from the Social Security Administration, and some government employees hired before specific dates who are covered by different pension systems.

What happens if I work for multiple employers in one year?

If you work for two or more employers, each one withholds Social Security tax up to the wage cap. If your combined income exceeds the cap, you may have overpaid Social Security tax. You can claim a refund of the overpayment when you file your tax return. Medicare tax has no cap, so there is no refund for that portion.

Does FICA apply to all types of income?

FICA applies to wages and self-employment income. It does not apply to investment income, interest, dividends, or capital gains. If you receive income from sources other than employment or self-employment, those are not subject to FICA tax, though they may be subject to other federal income taxes.