How FICA Taxes Work and Why They Matter

What FICA Stands For

FICA stands for the Federal Insurance Contributions Act, the 1935 law that created the payroll tax system funding Social Security and Medicare. Despite the bureaucratic name, FICA taxes have a simple structure: two separate taxes, two fixed rates, one important cap.

Every working American pays FICA — whether you're a first-year teacher, a freelance consultant paying self-employment tax, or a tech executive earning $500,000. The rates are the same for everyone.

The Two FICA Taxes

Social Security (OASDI): 6.2%

Social Security is withheld at exactly 6.2% of your gross wages. Your employer also pays a matching 6.2%, making the total contribution to Social Security 12.4% of your wages — though you only see the employee half on your pay stub.

The critical feature of Social Security is the wage base cap. For 2026, Social Security is only withheld on the first $184,500 of wages. After you've earned $184,500 in a calendar year, Social Security withholding stops entirely for the rest of the year. Your paycheck will be noticeably larger starting with the first paycheck after you cross that threshold.

Medicare: 1.45%

Medicare is withheld at 1.45% of all wages with no cap whatsoever. Whether you earn $30,000 or $3,000,000, Medicare applies to every dollar. Your employer also matches the 1.45%, for a combined 2.9% total.

High earners (single filers earning over $200,000, married joint filers over $250,000) pay an additional 0.9% Additional Medicare Tax on wages above those thresholds. Your employer is required to start withholding the additional 0.9% once your wages from that employer exceed $200,000, regardless of your filing status. If you and your spouse's combined income triggers the threshold but neither employer withheld enough, you'll pay the difference on your tax return.

FICA at Different Income Levels (2026)

Note: FICA is the employee share only. Employer pays an equal match not shown here.

Self-Employed? You Pay Both Sides

If you're self-employed — freelancer, contractor, or sole proprietor — you pay the full 15.3% self-employment tax (12.4% Social Security + 2.9% Medicare) on your net self-employment income. This is because you're both employer and employee, so you cover both sides of the FICA contribution.

The good news: you can deduct half of your self-employment tax from your gross income on your federal return. This is sometimes called the "SE tax deduction" and reduces your income tax bill (though not the SE tax itself).

The self-employment tax applies to the first $184,500 of net self-employment income for Social Security (same cap as employees) and to all net income for Medicare.

What You Get in Return

FICA taxes aren't just another line item — they fund specific benefits:

• Social Security retirement benefits: Your work history and lifetime earnings determine your monthly Social Security retirement benefit. You can start receiving reduced benefits at 62 or full benefits at your full retirement age (67 for those born after 1960).
• Social Security disability insurance (SSDI): If you become disabled before retirement age and meet work history requirements, SSDI provides monthly income.
• Survivors benefits: Your spouse and dependent children may receive benefits if you die while working.
• Medicare Part A: If you've paid into Medicare for at least 10 years (40 quarters) of work, you qualify for premium-free Medicare Part A (hospital insurance) at age 65.

FICA vs Income Tax: Key Differences

Curious how FICA affects your specific paycheck? Use the Pay-Breakdown paycheck calculator to see your exact Social Security and Medicare withholding broken out alongside your income tax.