FICA is the tax that funds Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act. It is the payroll tax taken from your paycheck that funds two separate programs: Social Security and Medicare. When you see "FICA" or "OASDI" on your pay stub, that money goes into a federal trust fund, not into a personal account with your name on it.

Your employer also pays an equal amount of FICA tax on your behalf — you do not see this deducted from your check, but it counts toward your work record. Together, these contributions build your may be able to access for Social Security retirement, disability, and survivor benefits later, and for Medicare coverage at age 65.

FICA is separate from income tax. You pay both. Income tax goes to the general Treasury; FICA goes only to Social Security and Medicare. The two are calculated differently and appear as separate line items on your pay stub.

Key Takeaways

  • FICA is a mandatory payroll tax split between Social Security (6.2% of your wages) and Medicare (1.45%), with your employer paying an equal amount.
  • Your FICA contributions build a work record that determines whether you can receive Social Security retirement, disability, or survivor benefits.
  • FICA is not a personal savings account — the money you pay in today funds current beneficiaries, and future workers' FICA will fund your benefits.
  • Self-employed people pay both the employee and employer portion of FICA, totaling 15.3%, though they can deduct half on their tax return.
  • You must have earned at least 40 FICA-taxed work credits (roughly 10 years of work) to receive Social Security retirement or disability benefits.

How much FICA you pay and where it goes

If you are a wage or salary employee, FICA is split into two parts. The Social Security portion is 6.2% of your gross wages, up to a cap that changes each year. In 2024, you pay Social Security tax only on the first $168,600 of income; anything above that is not subject to the Social Security tax. The Medicare portion is 1.45% of all your wages with no cap — you pay it on every dollar you earn.

Your employer matches both amounts. So if you earn $50,000 a year, you pay $3,100 in Social Security tax and $725 in Medicare tax. Your employer pays the same $3,825 on your behalf, though you do not see it deducted from your check.

If you are self-employed, you pay both the employee and employer portions yourself. That means 12.4% for Social Security (on income up to the annual cap) and 2.9% for Medicare, totaling 15.3% of your net self-employment income. You can deduct half of this on your tax return, which reduces your taxable income but does not reduce the FICA tax itself.

FICA contributions and your Social Security work record

Every dollar of FICA you pay counts toward your Social Security work record. The Social Security Administration tracks this record and uses it to decide whether you can receive benefits and how much those benefits will be.

To receive Social Security retirement benefits, you must have earned at least 40 work credits. You earn one credit for every $1,730 of wages subject to FICA (this amount changes yearly). Most people earn four credits per year if they work full-time, so 40 credits typically takes about 10 years. You cannot earn more than four credits in a single year, even if you earn far more than the threshold.

If you stop working before you reach 40 credits, you do not lose the credits you have earned — they stay on your record. But you will not be able to claim Social Security retirement benefits until you reach 40 credits. Disability and survivor benefits have different credit requirements; some can be claimed with fewer credits if you became disabled or died while younger.

FICA is not a personal savings account

A common misunderstanding is that FICA money is set aside in an account with your name on it, waiting for you to retire. This is not how Social Security works. FICA is a pay-as-you-go system: the taxes you pay today fund the benefits paid to current retirees, disabled workers, and survivors. When you retire, your benefits will be funded by the FICA taxes paid by workers at that time.

This matters because it means your benefit amount is not determined by how much you paid in, but by a formula based on your highest 35 years of earnings. Someone who earned very high wages for 10 years and then stopped working will receive a smaller benefit than someone who earned moderate wages consistently for 35 years, even if the first person paid more total FICA tax.

It also means that changes to the Social Security system — such as raising the retirement age, adjusting the tax rate, or changing the benefit formula — can affect you even if you have already paid in for decades. Your FICA contributions do not may provide a fixed return.

What happens if you do not pay FICA

If you work for an employer and FICA is not being deducted from your paycheck, that is a sign something is wrong. Employers are required by law to withhold and pay FICA on all wages. If your employer is not doing this, you should report it to the Department of Labor or the IRS.

If you work "under the table" or in cash without reporting income, you are not paying FICA and not building a Social Security work record. This means you will not be able to claim Social Security benefits later, even if you worked for many years. There is no way to go back and pay FICA retroactively for unreported work.

Some workers — such as certain government employees, railroad workers, or people working for religious organizations that have exemptions — may not pay FICA. These workers often have alternative retirement systems. If you are unsure whether your job is covered by FICA, ask your employer or check your pay stub.

FICA and Medicare may be able to access

The Medicare portion of FICA (1.45%) funds Medicare Part A, which covers hospital insurance. You become may be able to access for Medicare at age 65 if you have paid FICA taxes for at least 10 years (40 quarters). You do not have to be retired to claim Medicare; you can claim it at 65 even if you are still working.

If you have not paid FICA for 10 years by age 65, you can still purchase Medicare Part A by paying a monthly premium, but the premium will be higher than it would be if you had the required work history. Some people who are not yet 65 but have certain disabilities or end-stage renal disease can also claim Medicare earlier if they have enough FICA-covered work history.

Self-employed workers and FICA

If you are self-employed, you pay FICA through the Self-Employment Tax on your annual tax return. You calculate this based on your net self-employment income (your business income minus business expenses). The rate is 15.3% total: 12.4% for Social Security and 2.9% for Medicare.

You pay this tax when you file your income tax return, usually once a year, though if you expect to owe more than a certain amount you may need to make quarterly estimated tax payments. Unlike wage workers, you do not have FICA withheld from a paycheck — you are responsible for setting aside the money and paying it yourself.

The Social Security cap still applies to self-employed workers. In 2024, you pay the 12.4% Social Security tax only on the first $168,600 of net self-employment income. Above that, you pay only the 2.9% Medicare tax. You can deduct half of your self-employment tax on your income tax return, which lowers your taxable income but does not reduce the FICA tax you owe.

Frequently Asked Questions

Can I get my FICA money back if I do not claim Social Security?

No. FICA is a tax, not a savings account. If you die before claiming Social Security, your FICA contributions do not go back to your estate. However, your family members may be able to claim survivor benefits based on your work record, which is a different benefit funded by the same FICA tax.

What if I worked in another country — does that FICA count?

Work credits earned in another country do not automatically count toward U.S. Social Security. However, the U.S. has totalization agreements with some countries that allow you to combine work credits from both countries to reach the 40-credit threshold. Check with the Social Security Administration if you have worked abroad.

Do I pay FICA on tips or bonuses?

Yes. Tips and bonuses are considered wages and are subject to FICA tax. Your employer should withhold FICA on tips you report and on all bonuses. If FICA was not withheld, contact your employer or the IRS.

Why is there a Social Security tax cap but not a Medicare cap?

Congress set the Social Security tax cap to limit how much high earners pay into the system. The Medicare tax has no cap, so high earners pay 1.45% on all their income. Additionally, high earners pay an extra 0.9% Medicare tax on income above certain thresholds ($200,000 for single filers, $250,000 for married couples filing jointly).

If I am not a U.S. citizen, do I still pay FICA?

If you are authorized to work in the U.S., you pay FICA like any other worker. Your work credits count toward Social Security benefits. If you are not authorized to work, you should not be employed, and FICA should not be withheld. Some visa holders have restrictions on Social Security benefits even if they paid FICA; check with the Social Security Administration about your specific visa status.