The FICA tax rate is 15.3 percent of your wages, split between you and your employer

FICA stands for Federal Insurance Contributions Act. The total rate is 15.3 percent: 12.4 percent for Social Security and 2.9 percent for Medicare. Your employer pays half (7.65 percent) and you pay half (7.65 percent). The half you pay comes directly out of your paycheck before you see the money.

The Social Security portion (12.4 percent combined) only applies to wages up to a certain amount each year. That wage cap changes annually — in 2024 it was $168,600. Once you earn above that amount in a year, you stop paying Social Security tax on additional income. Medicare tax (2.9 percent combined) has no wage cap and applies to all your earnings.

If you are self-employed, you pay both halves yourself — the full 15.3 percent — because you are both the employee and the employer. You can deduct half of what you pay as a business expense when you file taxes.

Key Takeaways

  • You pay 7.65 percent of your wages in FICA tax; your employer pays another 7.65 percent.
  • Social Security tax (12.4 percent combined) stops once you earn above the annual wage cap, which changes each year.
  • Medicare tax (2.9 percent combined) applies to all your earnings with no upper limit.
  • Self-employed workers pay the full 15.3 percent themselves but can deduct half on their tax return.

How FICA tax appears on your pay stub

Your pay stub shows two separate line items: one for Social Security and one for Medicare. The Social Security line will show your employee portion (6.2 percent of gross wages, up to the annual cap). The Medicare line will show 1.45 percent of your gross wages with no limit.

Both amounts are deducted from your gross pay before income tax is calculated. This means FICA comes out first, then federal income tax, then any state or local taxes you owe. Your employer sends your FICA withholding to the IRS along with their matching contribution.

What happens when you reach the Social Security wage cap

Once you earn enough in a calendar year to hit the wage cap, your employer stops withholding Social Security tax from your paycheck for the rest of that year. Your Medicare tax continues as normal. This matters most if you change jobs mid-year or have multiple jobs — you could end up overpaying Social Security tax if your employers do not coordinate.

If you overpay Social Security tax because you worked multiple jobs or changed employers, you can claim a credit on your tax return. You file Form 1040 and the IRS refunds the excess when you file in the following year.

Additional Medicare tax for higher earners

There is an additional 0.9 percent Medicare tax that applies only to wages above a certain threshold. For 2024, that threshold was $200,000 for single filers and $250,000 for married couples filing jointly. This additional tax is withheld by your employer once you cross that income level in a year.

Unlike regular Medicare tax, the additional Medicare tax has no employer match — you pay all 0.9 percent yourself. This tax was created as part of the Affordable Care Act and funds Medicare.

FICA tax and your Social Security and Medicare benefits

The FICA taxes you pay fund two separate programs. Social Security tax goes into a trust fund that pays retirement, disability, and survivor benefits. Medicare tax funds hospital insurance (Part A) and is matched by your employer's contribution. The amount you pay does not directly determine your benefit amount, but your earnings record — which the IRS tracks through FICA withholding — does affect how much you receive later.

When you turn 62, you can start drawing Social Security retirement benefits based on your earnings history. The more you earned and paid into the system, the higher your benefit. Medicare may be able to access begins at 65 and is also tied to your work history.

Self-employed FICA calculations

If you are self-employed, you calculate FICA tax on your net business income (income minus business expenses). You pay the full 15.3 percent, but you can deduct half of it as a business expense on Schedule C when you file your tax return. You report self-employment tax on Schedule SE and pay it when you file your annual return or through quarterly estimated tax payments.

Many self-employed workers set aside money throughout the year to cover their FICA obligation because it comes due all at once. The IRS allows you to make quarterly estimated tax payments (which include income tax, self-employment tax, and other taxes owed) on April 15, June 15, September 15, and January 15.

How FICA rates have changed over time

The Social Security tax rate has been 6.2 percent (employee portion) since 1990. The Medicare tax rate has been 1.45 percent (employee portion) since 1966. These rates are set by law and do not change year to year. The wage cap for Social Security, however, adjusts annually based on national wage growth — it increases most years but occasionally stays flat.

Congress can change FICA rates only through legislation. There have been temporary changes in the past — for example, the employee Social Security tax rate was reduced to 4.2 percent for 2011 and 2012 as part of a payroll tax holiday — but these are rare and require a new law.

Frequently Asked Questions

Why do I pay FICA tax if I am not sure I will get Social Security benefits?

FICA tax funds Social Security and Medicare whether or not you use the benefits. Most workers do eventually draw on one or both programs. Even if you die before retirement, your family may receive survivor benefits, and if you become disabled, you may receive disability benefits. Medicare is available to nearly all workers at age 65.

Can I opt out of paying FICA tax?

No. FICA tax is mandatory for all employees and self-employed workers. Some religious groups have narrow exemptions from self-employment tax if they meet specific IRS criteria, but these are rare and require advance approval. W-2 employees cannot opt out.

What if my employer did not withhold FICA tax from my paycheck?

Contact your employer immediately. They are required by law to withhold and remit FICA tax. If they did not, you may still owe the tax, and your employer may face penalties. The IRS can help you resolve this if your employer refuses to correct it.

Does FICA tax apply to all types of income?

FICA tax applies to wages and self-employment income. It does not apply to investment income, interest, dividends, or capital gains. It also does not apply to certain types of compensation like some fringe benefits or dependent care accounts.