FICA is the tax withheld from your paycheck for Social Security and Medicare

FICA stands for Federal Insurance Contributions Act. It is the law that requires your employer to take money out of your paycheck and send it to the federal government. That money funds two programs: Social Security (retirement, disability, and survivor benefits) and Medicare (health insurance for people 65 and older, and some younger people with disabilities).

FICA is not optional. If you work as an employee, your employer must withhold it. The amount comes directly from your gross pay before you see your paycheck. Self-employed people pay FICA too, though they handle it differently — they pay both the employee and employer portion when they file taxes.

You will see FICA listed on your pay stub as two separate line items: Social Security tax and Medicare tax. Each one has its own rate and its own wage cap (a limit on how much of your income gets taxed).

Key Takeaways

  • FICA withholds money from your paycheck for Social Security and Medicare, two federal insurance programs you may use later in life.
  • Social Security tax is 6.2 percent of your wages up to a yearly cap (the cap changes each year); Medicare tax is 1.45 percent with no cap.
  • Your employer withholds the same amount you do and sends both portions to the government, so the total cost to your employer is roughly double what you see deducted.
  • Self-employed people pay both the employee and employer portions themselves, which is why their FICA tax is roughly double what a W-2 employee pays on the same income.
  • FICA is separate from federal income tax — you will see both deducted from your paycheck.

How much FICA comes out of your paycheck

Social Security tax is 6.2 percent of your wages, but only up to a yearly wage cap. That cap changes each year. In 2024, the cap was $168,600 — meaning once you earned that much in a year, no more Social Security tax was withheld from your remaining paychecks that year. In 2025, the cap is higher, but the exact amount depends on wage growth data released by the Social Security Administration.

Medicare tax is 1.45 percent of your wages with no cap. You pay it on every dollar you earn, no matter how much you make. However, if your income exceeds certain thresholds (which vary by filing status), an additional 0.9 percent Medicare tax applies to the amount over the threshold. This additional tax is withheld by your employer if you are a W-2 employee.

Together, Social Security and Medicare tax are usually around 7.65 percent of your gross pay (before the additional Medicare tax kicks in). Your employer withholds this amount and sends it to the government along with an equal amount they pay themselves.

Why FICA is withheld and what it funds

FICA was created in 1935 as part of the Social Security Act. The idea was that workers and employers would both contribute during a person's working years, and those contributions would fund benefits when the person retired, became disabled, or died.

Social Security tax funds retirement benefits (which you can claim as early as age 62, though the full benefit amount depends on your age when you claim), disability benefits (if you become unable to work before retirement age), and survivor benefits (paid to your family if you die). Medicare tax funds hospital insurance (Part A), which covers inpatient hospital stays, skilled nursing, hospice, and some home health care.

The money you pay in FICA is not held in a personal account with your name on it. Instead, current workers' contributions pay current retirees and beneficiaries. When you retire, future workers' contributions will help pay your benefits. This is called a "pay-as-you-go" system.

FICA for self-employed people

If you are self-employed, you pay FICA through self-employment tax when you file your annual tax return. Self-employment tax is roughly double what a W-2 employee pays on the same income, because you pay both the employee portion (6.2 percent for Social Security, 1.45 percent for Medicare) and the employer portion (another 6.2 percent and 1.45 percent).

However, you can deduct half of your self-employment tax when you calculate your adjusted gross income, which reduces your overall tax burden somewhat. You report self-employment tax on Schedule SE, which is part of your Form 1040 tax return.

The Social Security wage cap still applies to self-employed people — once your net self-employment income reaches the yearly cap, you stop paying the 6.2 percent Social Security portion, though you continue paying Medicare tax on all income.

FICA versus federal income tax

FICA and federal income tax are two separate withholdings. FICA funds Social Security and Medicare specifically. Federal income tax is a separate tax that funds general government operations and is withheld at a rate that depends on your income, filing status, and the number of dependents you claim on your W-4 form.

On your pay stub, you will see them listed separately. FICA withholding is fixed by law and does not change based on your personal situation. Federal income tax withholding can vary widely depending on how you fill out your W-4.

Some people owe federal income tax when they file their return, while others get a refund. FICA works differently — the amount you pay in during the year is the amount you have paid toward your future Social Security and Medicare benefits. There is no refund or additional payment due at tax time for FICA itself (though you may owe or receive a refund for federal income tax).

What happens to FICA money after it is withheld

Your employer sends the FICA tax they withhold from your paycheck, plus an equal amount they pay themselves, to the Internal Revenue Service (IRS) on a regular schedule — usually monthly or quarterly, depending on the size of the payroll. The IRS then deposits the money into the Social Security Trust Fund and the Medicare Trust Fund.

The Social Security Administration and Centers for Medicare and Medicaid Services (CMS) track how much you have paid in FICA over your lifetime. When you reach retirement age, become disabled, or if your family applies for survivor benefits after your death, they use that record to calculate your benefit amount. The longer you work and the more you earn, the higher your benefits will be (up to a maximum).

You can view your FICA contributions and estimated benefits by creating an account on ssa.gov and viewing your Social Security Statement. This statement shows how much you have paid in Social Security tax each year and estimates what your retirement, disability, and survivor benefits might be.

Frequently Asked Questions

Can I opt out of paying FICA?

No. FICA is mandatory for all employees and self-employed people. The only exceptions are certain religious groups that have been granted exemptions by the IRS, and some government employees hired before specific dates who are covered under different pension systems instead.

Do I get FICA money back if I don't use Social Security or Medicare?

No. FICA is a tax, not a savings account. You do not get a refund of FICA contributions if you do not claim Social Security or Medicare benefits. However, if you die before claiming Social Security, your family may be able to claim survivor benefits based on your earnings record.

What if I worked in multiple jobs — do I pay FICA on all of them?

Yes. Each employer withholds FICA based on your wages at that job. However, the Social Security wage cap applies to your total earnings across all jobs in a year. If you exceed the cap, you may have overpaid Social Security tax, and you can claim a credit for the overpayment when you file your tax return.

Does FICA apply to tips and bonuses?

Yes. FICA is withheld on all wages, including tips you report to your employer and bonuses. Tips you do not report to your employer are not subject to FICA withholding, but you are legally required to report all tips.

Why does my FICA withholding stop partway through the year?

That is the Social Security wage cap at work. Once your earnings reach the yearly cap, your employer stops withholding the 6.2 percent Social Security tax for the rest of that year. Medicare tax (1.45 percent) continues on all wages throughout the year.