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 withholds from your paycheck every pay period. The money goes to two programs: Social Security, which pays retirement and disability benefits, and Medicare, which covers hospital insurance for people 65 and older and some younger people with disabilities.

When you see "FICA" on your pay stub, it is split into two parts: Social Security tax (6.2 percent of your wages) and Medicare tax (1.45 percent of your wages). Your employer also pays a matching amount on your behalf — the same percentages — so the total contribution to these programs is double what you see withheld from your check.

FICA is mandatory for almost all workers in the United States. You pay it whether you work full-time, part-time, or are self-employed. The only common exceptions are certain government employees hired before specific dates and some religious groups that have received federal exemptions.

Key Takeaways

  • FICA tax funds Social Security retirement benefits and Medicare hospital insurance, and is withheld automatically from your paycheck.
  • You pay 6.2 percent for Social Security and 1.45 percent for Medicare; your employer pays the same amounts on top of your salary.
  • Self-employed workers pay both the employee and employer portions (15.3 percent total) through self-employment tax.
  • The amount you pay in FICA over your working years determines how much Social Security and Medicare you receive later.

How much FICA tax comes out of your paycheck

The Social Security portion of FICA is 6.2 percent, but only on wages up to a certain limit. That limit changes each year — in 2024 it was $168,600, meaning you stop paying Social Security tax once your annual earnings reach that amount. Medicare tax is 1.45 percent with no wage limit, so you pay it on every dollar you earn.

If you earn $50,000 a year, you would pay roughly $3,100 in Social Security tax and $725 in Medicare tax, for a total FICA withholding of about $3,825. Your employer would pay the same amount. If you earn $200,000 a year, you would pay the Social Security tax only on the first $168,600 (about $10,453), plus Medicare tax on the full $200,000 ($2,900), for a total of about $13,353 — while your employer pays a different amount because the Social Security portion caps out.

The wage limit for Social Security adjusts annually based on average wage growth in the economy. You can find the current year's limit on the Social Security Administration website or on your employer's tax forms.

Self-employed workers and FICA

If you are self-employed, you pay both the employee and employer portions of FICA through self-employment tax. This means you pay 15.3 percent total: 12.4 percent for Social Security (on earnings up to the annual limit) and 2.9 percent for Medicare (on all earnings). You report this on Schedule SE when you file your tax return.

Self-employed workers can deduct half of their self-employment tax when calculating their adjusted gross income for tax purposes, which reduces the overall tax burden slightly. You still pay the full 15.3 percent, but the deduction offsets some of it on your income tax return.

What FICA tax pays for

The Social Security portion of your FICA tax funds retirement benefits for workers 62 and older, disability benefits for workers of any age who cannot work, and survivor benefits for the families of deceased workers. The amount you receive in retirement is based on your earnings history — the more you paid in over your working years, the higher your benefit.

The Medicare portion funds hospital insurance (Part A), which covers inpatient hospital stays, skilled nursing facility care, and some home health services. It does not cover doctor visits or prescription drugs; those are covered by optional Medicare parts that have separate premiums. Medicare becomes available at age 65 for most people, though some younger people with disabilities or end-stage renal disease can receive it earlier.

FICA tax and your benefit amounts later

The FICA taxes you pay throughout your working life create a record with the Social Security Administration. When you reach retirement age or become disabled, your benefit amount is calculated based on your highest 35 years of earnings. Years when you paid more FICA tax count as higher earnings, which increases your eventual benefit.

If you have gaps in your work history — years when you earned little or nothing — those years still count in the calculation, which can lower your average. This is why people who worked consistently for 35 or more years typically receive higher Social Security benefits than those with interrupted work histories.

You can view your earnings record and estimated benefits by creating an account on the Social Security Administration website. The estimate shows what you might receive at different ages and assumes you continue working and earning at your current rate until retirement.

Additional Medicare tax for high earners

If you earn above a certain threshold, you pay an additional Medicare tax of 0.9 percent. The threshold is $200,000 for single filers and $250,000 for married couples filing jointly. This additional tax applies to wages above the threshold and is withheld by your employer automatically.

Unlike the standard Medicare tax, the additional Medicare tax does not have a matching employer contribution — only the employee pays it. Self-employed workers also pay this additional tax on net self-employment income above the threshold.

Frequently Asked Questions

Can I opt out of paying FICA tax?

No, FICA is mandatory for almost all workers. The only exceptions are certain government employees hired before specific dates and members of recognized religious groups that have received federal exemptions. If you are self-employed, you must pay self-employment tax unless you fall into one of these narrow categories.

What happens to FICA tax if I change jobs?

Your FICA tax record follows you automatically. The Social Security Administration tracks your earnings across all employers throughout your career. When you change jobs, your new employer begins withholding FICA tax, and it is added to your lifetime earnings record. There is no action you need to take.

Do I get FICA tax back on my tax return?

No. FICA tax is not refundable and does not come back to you as a refund. It is a permanent contribution to Social Security and Medicare. However, self-employed workers can deduct half of their self-employment tax when calculating taxable income, which reduces their overall income tax liability.

What if I did not pay FICA tax for some years?

Those years count as zero earnings in your Social Security benefit calculation, which lowers your average. You cannot go back and pay FICA retroactively. However, if you believe your record is wrong — for example, if an employer did not report your wages — you can contact the Social Security Administration to request a correction with proof of your earnings.