FICA is a federal payroll tax that funds Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act. It is a payroll tax that your employer withholds from your wages every pay period. The money goes to two programs: Social Security (which pays retirement, disability, and survivor benefits) and Medicare (which pays for health insurance for people 65 and older, and some younger people with disabilities).

FICA is not optional. If you work as an employee, your employer is required by law to take it out of your paycheck. Self-employed people pay FICA themselves when they file taxes. The amount withheld depends on your income and does not change based on your age, health, or how long you have worked.

You will see FICA broken into two line items on your pay stub: Social Security tax and Medicare tax. Your employer also pays a matching amount on your behalf, though you do not see that money — it goes directly to the government.

Key Takeaways

  • FICA has two parts: Social Security tax (6.2% of your wages) and Medicare tax (1.45% of your wages), both withheld by your employer.
  • Your employer pays an equal amount on your behalf, so the total FICA cost to fund these programs is double what you see on your pay stub.
  • FICA withholding is mandatory for all employees and self-employed workers; there is no way to opt out.
  • The Social Security portion only applies to income up to a certain cap, which changes each year, but Medicare tax applies to all income with no cap.

How much FICA comes out of your paycheck

Social Security tax is 6.2% of your gross wages, up to a yearly income cap. In 2024, that cap is $168,600, meaning once you earn that much in a year, no more Social Security tax is withheld for the rest of that year. Medicare tax is 1.45% of all your wages with no income cap — it keeps coming out no matter how much you earn.

If you are self-employed, you pay both the employee and employer portions, which totals 15.3% for Social Security (up to the cap) and 2.9% for Medicare. You pay this when you file your tax return, usually through quarterly estimated tax payments.

The income cap for Social Security changes every year based on wage growth. Your employer's payroll system automatically stops withholding Social Security tax once you hit the cap in a given year.

Where FICA money goes

Social Security tax funds three types of benefits: retirement payments for people 62 and older, disability payments for workers who cannot work due to injury or illness, and survivor benefits for the families of workers who die. Medicare tax funds hospital insurance (Part A), which covers inpatient hospital stays, skilled nursing, hospice, and some home health care.

These are not savings accounts in your name. FICA is a pay-as-you-go system: the taxes collected today pay benefits to current retirees and disabled workers. When you retire or become disabled, your benefits come from taxes collected from workers at that time.

Your FICA contributions are tracked by the Social Security Administration under your Social Security number. You can view your earnings record and estimated benefits online through your Social Security account at ssa.gov.

FICA withholding on your pay stub

Your pay stub will show at least two FICA line items: one for Social Security and one for Medicare. Some pay stubs also show a third line for Additional Medicare Tax, which is 0.9% and applies only to high earners (over $200,000 for single filers, $250,000 for married filing jointly). Your employer withholds this extra tax if you cross that threshold.

The FICA amounts shown are what your employer deducted from your gross pay. Below that, you will usually see your employer's matching contribution listed separately — this is informational only and does not reduce your take-home pay, but it counts toward your FICA record.

FICA and self-employment income

If you are self-employed or have side income, you owe FICA on that earnings too. Self-employed people pay the full 15.3% for Social Security (up to the cap) and 2.9% for Medicare, because they are both employee and employer. You calculate this on Schedule SE when you file your tax return.

You can deduct half of your self-employment tax as a business expense on your tax return, which reduces your taxable income slightly. But you still owe the full amount to the government.

What happens if you do not pay FICA

If you work off the books or your employer does not withhold FICA, you are still legally required to pay it. The IRS can pursue back taxes, penalties, and interest. More importantly, if you do not pay into Social Security and Medicare, those years do not count toward your benefits record. You may end up with a lower retirement benefit or no benefit at all.

If you believe your employer is not withholding FICA correctly, you can report it to the IRS using Form 13909 (Whistleblower Form). You can also contact your state labor department, which enforces wage and hour laws.

FICA and your Social Security record

Every dollar of FICA you pay into Social Security is credited to your earnings record. Social Security calculates your retirement benefit based on your 35 highest-earning years. If you have fewer than 35 years of earnings, zeros are counted for the missing years, which lowers your benefit amount.

You need 40 credits to be covered by Social Security. Most people earn 4 credits per year (one for each quarter), so 10 years of work usually gets you there. But the amount of your benefit depends on how much you earned during those years, not just whether you worked.

Frequently Asked Questions

Can I get FICA taxes back if I do not use Social Security or Medicare?

No. FICA is mandatory and non-refundable. Even if you never claim Social Security or Medicare benefits, the tax still comes out of your paycheck. The only exception is if you work in certain government jobs that have their own pension systems — some state and local employees do not pay FICA.

What if I work for two employers at the same time?

Both employers will withhold Social Security tax up to the yearly cap. If your combined income exceeds the cap, you may overpay Social Security tax. You can claim the overpayment as a credit on your tax return when you file. Medicare tax has no cap, so there is no overpayment issue there.

Do I pay FICA on tips?

Yes. Tips are considered wages and are subject to FICA withholding. Your employer should withhold FICA on tips you report to them. If you receive cash tips that you do not report, you are still legally required to pay FICA on them when you file your tax return.

Does FICA come out before or after income tax?

FICA comes out of your gross pay before federal income tax is calculated. Both are withheld from your paycheck, but they are separate taxes that fund different programs. FICA goes to Social Security and Medicare; income tax goes to the general federal budget.

What if I am not a U.S. citizen?

If you have a valid work visa or green card and work as an employee, your employer must withhold FICA. If you are undocumented and work, you may still owe FICA, though enforcement varies. Some undocumented workers have paid FICA for years and built a Social Security record they cannot use until they have legal status.