FICA is a federal 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 health insurance for people 65 and older, and some younger people with disabilities).
When you see "FICA" on your pay stub, it is usually split into two line items: Social Security tax and Medicare tax. Both come out before you see your take-home pay. Your employer also pays an equal amount on your behalf — that employer portion does not show on your stub, but it is part of what your job costs the company.
FICA is mandatory for almost all workers in the United States. If you are self-employed, you pay both the employee and employer portions yourself, which is called self-employment tax. The only common exception is certain religious groups that have received a waiver from the IRS.
Key Takeaways
- FICA taxes fund Social Security retirement benefits and Medicare health insurance, and they are taken from every paycheck for most workers.
- Social Security tax is 6.2 percent of your wages, and Medicare tax is 1.45 percent, for a combined 7.65 percent that your employer withholds.
- Your employer pays an equal 7.65 percent on your behalf, though you do not see this amount on your pay stub.
- You only pay Social Security tax on income up to a certain cap, which changes each year; Medicare tax has no income cap.
- The FICA taxes you pay now build your record for future Social Security and Medicare benefits.
How much FICA comes out of your paycheck
Social Security tax is 6.2 percent of your gross wages. Medicare tax is 1.45 percent of your gross wages. Together, that is 7.65 percent of your paycheck that goes to FICA.
The Social Security portion only applies to wages up to a certain limit. In 2024, that limit is $168,600. If you earn more than that in a year, you stop paying Social Security tax once you hit the cap — but Medicare tax continues on all your income with no upper limit. This is why high earners see FICA taxes drop off partway through the year.
Your actual take-home amount depends on other deductions too: federal income tax withholding, state and local taxes (if your state has them), and any voluntary deductions like health insurance premiums or retirement contributions. FICA is separate from all of these.
Why FICA is taken from your paycheck
FICA is a mandatory federal tax, not optional. Congress set it up in 1935 as a way to fund Social Security, and Medicare was added in 1965. The law requires employers to withhold it from every paycheck and send it to the U.S. Treasury.
The money you pay in FICA now builds your personal record with Social Security. When you retire, become disabled, or pass away, your family may receive benefits based on how much you paid in and for how long. The same applies to Medicare: once you turn 65, your years of FICA contributions make you may be able to access for Medicare coverage.
You cannot opt out of FICA, and you cannot choose to pay less. The rate and the income cap are set by federal law and change only if Congress votes to change them.
How to read FICA on your pay stub
Your pay stub will show FICA broken into at least two lines. One line says "Social Security" or "OASDI" (Old Age, Survivors, and Disability Insurance) and shows 6.2 percent of your gross pay. Another line says "Medicare" and shows 1.45 percent. Some pay stubs also show an "Additional Medicare Tax" line if you earn over a certain threshold ($200,000 for single filers, $250,000 for married filing jointly).
The amount withheld is calculated on your gross pay — the total before any other deductions. So if you earn $2,000 in a pay period, FICA is calculated on the full $2,000, even if you have health insurance premiums or retirement contributions that reduce your taxable income for other purposes.
If you work multiple jobs, you may pay Social Security tax to the cap on each job separately, which means you could overpay. You can claim a refund of the overpayment when you file your federal tax return.
The difference between FICA and income tax
FICA and federal income tax withholding are two separate deductions. FICA funds Social Security and Medicare specifically. Federal income tax withholding goes into the general Treasury and funds all federal government operations.
FICA has a fixed rate: 7.65 percent (6.2 percent Social Security plus 1.45 percent Medicare). Federal income tax withholding varies based on your W-4 form, your income level, and your filing status. You can adjust your federal withholding by changing your W-4, but you cannot change your FICA rate — it is the same for everyone.
Also, FICA has an income cap for Social Security (but not Medicare), while federal income tax applies to all your income with no cap. This is why someone earning $500,000 a year pays a much smaller percentage of their total income in FICA than someone earning $50,000.
What happens to the FICA money you pay
The FICA taxes withheld from your paycheck go to the U.S. Treasury, which deposits them into two trust funds: the Social Security Trust Fund and the Medicare Trust Fund. These funds pay out benefits to current retirees, disabled workers, and Medicare beneficiaries.
Social Security operates on a pay-as-you-go system: the FICA taxes paid by current workers largely fund the benefits paid to current retirees. Your FICA contributions do not sit in a personal account with your name on it. Instead, they support the system, and when you retire, future workers' FICA taxes will support your benefits.
You can view your own Social Security record and see how much you have paid in FICA by creating an account at ssa.gov and viewing your Social Security Statement. This statement shows your estimated retirement, disability, and survivor benefits based on your earnings history.
FICA for self-employed workers
If you are self-employed, you pay both the employee and employer portions of FICA yourself. This is called self-employment tax, and it totals 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare). You pay this when you file your federal tax return, usually on Schedule SE.
Self-employed workers can deduct half of their self-employment tax as a business expense, which reduces their taxable income. This deduction partially offsets the fact that they pay both portions. The Social Security income cap still applies — you only pay the 12.4 percent Social Security portion on income up to the annual limit.
If you have both W-2 income (from an employer) and self-employment income, you calculate self-employment tax on the net self-employment income and combine it with any FICA already withheld from your W-2 wages to see if you have overpaid the Social Security cap.
Frequently Asked Questions
Can I get FICA taxes back when I file my tax return?
No, FICA is not refundable. You cannot get back the Social Security and Medicare taxes withheld from your paycheck. However, if you overpaid Social Security tax because you worked multiple jobs or changed jobs during the year, you can claim a refund of the overpayment on your federal tax return.
What if I did not pay FICA because I was paid under the table?
Work paid under the table is still subject to FICA and income tax by law, even if the employer did not withhold it. If you were paid cash and no taxes were taken out, you are responsible for reporting that income on your tax return. You can also contact the IRS if you believe your employer intentionally avoided withholding taxes.
Do I pay FICA on tips?
Yes. Tips are considered wages and are subject to FICA taxes. 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 report them as income and pay FICA on them when you file your tax return.
Why does my FICA stop partway through the year?
Social Security tax stops once you reach the annual income cap, which is $168,600 in 2024. If you earn more than that, you stop paying the 6.2 percent Social Security portion for the rest of the year. Medicare tax continues on all income with no cap. The income cap increases each year based on wage growth.
Does FICA count toward my income tax refund or owed taxes?
No. FICA is separate from federal income tax withholding. Your refund or amount owed is based only on your federal income tax withholding and your actual tax liability. FICA does not factor into that calculation, though it does appear on your tax return as information.