Both you and your employer pay FICA, split down the middle

FICA taxes come out of your paycheck and your employer's pocket in equal parts. You pay 7.65% of your gross wages; your employer pays another 7.65%. Together, that 15.3% funds Social Security and Medicare. If you're self-employed, you pay both halves yourself — 15.3% total — because you are technically both worker and employer.

The split is automatic on a W-2 job. Your employer withholds your half from each paycheck and sends it to the IRS along with their half. You never see your portion leave your account separately; it's already gone before you get paid. Self-employed people have to calculate and pay it themselves, usually quarterly, using Form 1040-ES.

The only time the split changes is if you earn over a certain wage cap. In 2024, Social Security tax stops after you've earned $168,600 for the year — but Medicare tax (the 2.9% portion) continues on all income with no cap. High earners also pay an extra 0.9% Medicare tax on wages above $200,000 (or $250,000 if married filing jointly).

Key Takeaways

  • Employees pay 7.65% of gross wages; employers pay 7.65% — the split is automatic and equal.
  • Self-employed people pay the full 15.3% themselves because they are both worker and employer.
  • Social Security tax stops after you reach the annual wage cap, but Medicare tax continues on all income.
  • Your employer's portion is a business expense they deduct; your portion reduces your take-home pay.

How the employer's share works as a business cost

When your employer pays their half of FICA, it's a deductible business expense — they reduce their taxable income by that amount. This means the government subsidizes part of the cost through lower corporate taxes. From the employer's perspective, FICA is a mandatory payroll tax they cannot avoid if they have employees.

Some employers offer to "split" FICA differently as a negotiation tactic — for example, paying you more in exchange for you covering more of the tax. This is illegal. The law sets the split at 50-50, and neither party can shift their legal obligation to the other. If an employer tries this, report it to the Department of Labor.

What happens to the money you and your employer pay

Your 7.65% goes into two separate trust funds: 6.2% to Social Security and 1.45% to Medicare Part A (hospital insurance). Your employer's 7.65% goes into the same two funds. The money doesn't sit in an account with your name on it; it flows into the general Social Security and Medicare pools, which pay current beneficiaries.

When you turn 62 or older, you become may be able to access to draw from Social Security based on your earnings record — the amount depends on how much you paid in and when you claim. Medicare may be able to access begins at 65, regardless of how much FICA you paid, though people with end-stage renal disease or ALS can may have access to earlier.

The connection between what you pay and what you receive is real but not one-to-one. Social Security is a social insurance program, not a savings account. Low-wage workers often receive benefits that exceed what they paid in; high-wage workers may receive less relative to their contributions.

Self-employed FICA: paying both halves yourself

If you're self-employed, you pay the full 15.3% on net self-employment income (your business profit after expenses). You calculate this on Schedule SE and report it on your tax return. Unlike W-2 employees, you don't have an employer withholding your share — you have to set the money aside and pay it yourself, usually in quarterly installments.

The IRS gives self-employed people one small break: you can deduct half of your self-employment tax as an above-the-line deduction on your tax return. This reduces your taxable income but does not reduce the FICA tax itself. If you owe $3,000 in self-employment tax, you still pay $3,000, but you get to deduct $1,500 from your income for tax purposes.

Gig workers, freelancers, and small business owners all fall into this category. If you receive a 1099 form instead of a W-2, you are responsible for calculating and paying your own FICA. Many gig platforms do not withhold anything, so the full burden falls on you at tax time.

FICA for household employees and farm workers

If you hire a housekeeper, nanny, or gardener and pay them more than a certain threshold ($2,700 in 2024, though this changes yearly), you become their employer and must pay FICA on their wages. You withhold their 7.65% from their paycheck and pay your 7.65% separately. You report this on Schedule H when you file your taxes.

Farm workers follow the same rule if you pay them more than $150 in a calendar year. Agricultural employers must withhold and pay FICA just like any other employer. Many household employers miss this requirement, which can result in back taxes and penalties if discovered during an audit.

What FICA does not cover

FICA funds Social Security retirement, disability, and survivor benefits, plus Medicare Part A. It does not fund Medicare Parts B, C, or D (doctor visits, private plans, prescription drugs), Medicaid, unemployment insurance, or workers' compensation. Those programs have separate funding sources or are funded through different payroll taxes.

Some government employees — certain federal workers, railroad employees, and some state and local workers — do not pay FICA at all. They pay into separate pension systems instead. If you work for a government agency, check your pay stub to see whether FICA is being withheld; if it's not, you're likely in one of these alternative systems.

Frequently Asked Questions

Can I opt out of paying FICA?

No. FICA is mandatory for all W-2 employees and self-employed people with net earnings over $400. The only exceptions are certain government employees in alternative pension systems and some religious groups with specific beliefs about insurance. You cannot choose to stop paying FICA.

What if my employer doesn't withhold FICA from my paycheck?

Report it to the Department of Labor Wage and Hour Division. Your employer is breaking the law. You are still liable for the taxes at the end of the year, but the employer can face penalties and back-pay requirements. Do not ignore it — the IRS will eventually catch up.

Do I pay FICA on tips?

Yes. Tips are considered wages for FICA purposes. You must report all tips to your employer, and FICA is withheld on the total (wages plus tips). If you don't report tips, you still owe FICA on them when the IRS discovers the unreported income.

Does FICA apply to bonuses and overtime?

Yes. FICA applies to all compensation — bonuses, overtime, commissions, and paid time off. The only income that avoids FICA is certain fringe benefits (like health insurance premiums paid by your employer) and specific exclusions like certain scholarships or workers' compensation.

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

Each employer withholds FICA separately on your wages from them. If your combined wages exceed the Social Security wage cap, you may overpay Social Security tax. You can claim a credit for the overpayment when you file your tax return, but you have to file to get it back.