FICA is a tax that funds Social Security and Medicare

FICA stands for Federal Insurance Contributions Act. It is a payroll tax that your employer takes directly from your paycheck. The money goes to two programs: Social Security (which pays retirement, disability, and survivor benefits) and Medicare (which pays for hospital insurance when you turn 65).

You will see FICA listed on your pay stub in two parts: Social Security tax and Medicare tax. Both are mandatory if you work as an employee. The amount deducted is a percentage of your gross pay — the money you earn before taxes and other deductions.

Key Takeaways

  • FICA has two components: Social Security tax (6.2% of your pay) and Medicare tax (1.45% of your pay), for a total of 7.65%.
  • Your employer also pays an equal amount of FICA tax on your behalf, though you do not see this on your pay stub.
  • FICA is separate from federal income tax withholding — they are two different deductions.
  • The money you pay into FICA now determines how much you receive from Social Security and Medicare later.

How much FICA comes out of your paycheck

The Social Security portion is 6.2% of your gross pay, up to a wage cap that changes each year. In 2024, you stop paying Social Security tax once you have earned $168,600 for the year. After that, no more Social Security tax is taken from your remaining paychecks that year.

The Medicare portion is 1.45% of your gross pay with no wage cap — you pay it on every dollar you earn, no matter how much you make. If you earn over $200,000 as a single filer (or $250,000 if married filing jointly), an additional 0.9% Medicare tax applies to the income above that threshold.

Together, the standard FICA deduction is 7.65% of your gross pay. On a $50,000 annual salary, that is roughly $3,825 per year, or about $160 per paycheck if you are paid biweekly.

Your employer pays FICA too, but you do not see it

When you pay 7.65% in FICA tax, your employer pays an identical 7.65% on your behalf. This employer contribution does not appear on your pay stub because it comes from the company's budget, not yours. However, it is part of your total compensation cost to the employer.

Self-employed people pay both the employee and employer portions themselves — 15.3% total — because they are both the worker and the business. They can deduct half of this on their tax return, but they still owe the full amount.

FICA versus federal income tax withholding

FICA and federal income tax are separate deductions. Federal income tax withholding is based on the W-4 form you fill out when you start a job. The amount depends on your filing status, number of dependents, and other income. FICA, by contrast, is a fixed percentage with no choices — it is the same for everyone.

You might see both listed on your pay stub. A typical stub shows gross pay, then FICA deductions, then federal income tax withholding, then state and local taxes if applicable, then any other deductions like health insurance or retirement contributions. The order varies by employer, but all three — FICA, federal income tax, and any state tax — are withheld from your paycheck.

Where FICA money goes

Social Security tax funds the Social Security program, which pays monthly benefits to retirees, disabled workers, and surviving family members of deceased workers. Medicare tax funds the Medicare program, which covers hospital insurance (Part A) for people 65 and older, and helps fund other Medicare parts.

The money is not held in an individual account with your name on it. Instead, current workers' FICA taxes pay current beneficiaries' benefits. When you retire, future workers' FICA taxes will pay your benefits. This is called a pay-as-you-go system.

How FICA affects your future benefits

Your FICA contributions create a record of earnings. Social Security uses your 35 highest-earning years to calculate your retirement benefit amount. The more you earn and pay into FICA, the higher your eventual benefit. Medicare may be able to access at 65 is based on paying FICA tax for at least 10 years (40 quarters).

You can view your earnings record and estimated benefits by creating an account at ssa.gov (Social Security Administration). The site shows how much you have paid into Social Security and what your benefit might be at different retirement ages. This record is important to check for errors, since mistakes can lower your future payments.

What happens if you do not pay FICA

If you are an employee, you cannot opt out of FICA — it is mandatory. Your employer is required by law to withhold it and send it to the government. If an employer fails to withhold FICA, the employer is liable for the tax, not you, though you may still owe federal income tax on that income.

Some workers are exempt from FICA, including certain religious groups, some government employees hired before 1984, and nonresident aliens on specific visa types. These are rare exceptions. If you think you might be exempt, contact your employer's payroll department or the IRS.

Frequently Asked Questions

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

FICA is a mandatory tax, not optional insurance. You pay it whether or not you plan to claim benefits later. However, if you do not work long enough to earn 40 quarters of coverage (roughly 10 years), you will not receive a Social Security retirement benefit. You can still receive Medicare at 65 if you paid FICA for at least 10 years.

Can I get my FICA money back if I leave the country?

No. FICA taxes are not refundable. If you leave the United States permanently, you forfeit any Social Security benefits you have not yet claimed. Some countries have agreements with the U.S. that allow limited benefits, but this varies by country. Contact the Social Security Administration before moving abroad.

Does FICA come out before or after my other deductions?

FICA is calculated on your gross pay — the full amount you earn before any deductions. Federal income tax withholding is also calculated on gross pay. Health insurance premiums, retirement contributions, and other deductions may be taken before or after FICA depending on whether they are pre-tax or post-tax. Your pay stub shows the order your employer uses.

What if I work two jobs — do I pay FICA twice?

Yes, you pay FICA on both jobs. However, if your combined earnings exceed the Social Security wage cap in a year, you may overpay Social Security tax. You can claim a refund of the overpayment when you file your tax return. Medicare tax has no cap, so you pay 1.45% on all earnings from both jobs.