FICA tax is calculated as a percentage of your gross wages, split between Social Security and Medicare, with different rates for each
FICA (Federal Insurance Contributions Act) tax comes out of your paycheck in two parts. Social Security takes 6.2% of your wages up to a yearly cap, and Medicare takes 1.45% of all your wages with no cap. If you are self-employed, you pay both the employee and employer portions — 12.4% for Social Security and 2.9% for Medicare — though you can deduct half of it on your tax return. Your employer calculates and withholds these amounts automatically if you are on a payroll.
The Social Security wage base limit changes each year. For 2024, you stop paying Social Security tax once your wages reach $168,600 in a calendar year. After that point, only Medicare tax continues. This means high earners pay a smaller percentage of total income to Social Security than lower earners do.
Key Takeaways
- Social Security tax is 6.2% of wages up to an annual cap ($168,600 in 2024), and Medicare tax is 1.45% of all wages with no limit.
- Your employer withholds both taxes automatically from your paycheck if you are a W-2 employee; self-employed workers pay the full 15.3% but can deduct half on their return.
- The Social Security wage base limit increases most years based on national wage growth, so the cutoff amount changes annually.
- Additional Medicare tax of 0.9% applies to wages above $200,000 (single) or $250,000 (married filing jointly), and you pay this yourself with no employer match.
How Social Security tax is calculated
Social Security tax applies to your gross wages — the amount before any deductions. Your employer takes 6.2% of each paycheck until your year-to-date earnings hit the wage base limit. Once you cross that threshold in a given calendar year, no more Social Security tax is withheld for the rest of that year.
The wage base limit is adjusted annually. The Social Security Administration announces the new limit in October for the following year, based on the average wage index for the prior year. This means the cutoff amount you see on your 2024 paystubs will be different from 2025, and different again in 2026. If you change jobs mid-year, each employer withholds Social Security tax independently up to the limit, which can result in overwithholding if your combined wages from both jobs exceed the cap. You can claim a credit for the overpayment when you file your tax return.
How Medicare tax is calculated
Medicare tax is simpler than Social Security because it has no wage cap. Your employer withholds 1.45% of every dollar you earn, no matter how much you make. This continues throughout the year with no cutoff.
However, there is an additional Medicare tax of 0.9% that kicks in at higher income levels. This extra tax applies to wages above $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married filing separately. Unlike the regular Medicare tax, your employer does not match this additional tax — you pay the full 0.9% yourself. Your employer is responsible for withholding it, but it comes entirely from your wages.
Self-employment tax and the deduction
If you are self-employed, you calculate FICA tax differently because you are both employee and employer. You owe 12.4% for Social Security (up to the wage base limit) and 2.9% for Medicare on your net self-employment income, for a total of 15.3%. You report this on Schedule SE and pay it with your quarterly estimated tax payments or when you file your annual return.
The tax code gives self-employed workers a partial offset: you can deduct half of your self-employment tax on your Form 1040. This deduction reduces your adjusted gross income (AGI) but does not reduce the amount of tax you actually owe. If you have high self-employment income, you may also owe the additional 0.9% Medicare tax, calculated the same way as for W-2 employees.
What counts as wages for FICA purposes
FICA tax is calculated on wages, which includes your salary, hourly pay, bonuses, and commissions. It also includes certain fringe benefits that your employer provides, such as the value of group health insurance premiums your employer pays on your behalf (though the premiums themselves are not subject to income tax, they are subject to FICA).
Some items are excluded from FICA wages. Contributions you make to a traditional 401(k) or 403(b) are not subject to income tax, but they are subject to FICA tax — this is a key difference from income tax withholding. Employer-provided health insurance premiums, dependent care accounts, and transit benefits are also subject to FICA. Distributions from retirement accounts, investment income, and reimbursements for business expenses do not trigger FICA tax.
Checking your FICA withholding on your paystub
Your paystub shows the FICA taxes withheld in separate line items. Look for "Social Security Tax" or "OASDI" (Old-Age, Survivors, and Disability Insurance) and "Medicare Tax" or "Med Tax". The amount should match 6.2% of your gross pay for Social Security (unless you have already hit the wage base limit that year) and 1.45% for Medicare.
If the withholding looks wrong, check whether you have already exceeded the Social Security wage base limit earlier in the year. If you have multiple jobs, each employer withholds independently, so you may see Social Security tax on both paychecks even after you have paid the maximum. If you notice a calculation error — for example, if your employer is withholding the wrong percentage — contact your payroll department to correct it. You can also review your earnings record on the Social Security Administration website to verify what has been reported.
How FICA affects your tax return
FICA tax withheld from your paycheck is separate from income tax withholding. The two are calculated independently and appear as different line items on your paystub. When you file your tax return, FICA is not refundable — you cannot get it back even if your income is low enough that you owe no income tax.
If you overpaid Social Security tax because you had multiple jobs or changed employers, you can claim a credit on your Form 1040. The IRS will refund the excess when you file. If you are self-employed, the self-employment tax deduction reduces your AGI, which can lower your income tax liability and may affect other tax benefits you claim, such as the Earned Income Tax Credit or education credits.
Frequently Asked Questions
Why do I still pay Social Security tax on my 401(k) contributions?
Traditional 401(k) contributions reduce your income tax but not your FICA tax. The law treats them differently: they are deferred from income tax purposes but are considered wages for Social Security and Medicare. This is why your FICA withholding is calculated on your gross pay before the 401(k) deduction is applied.
What happens if I work two jobs and pay too much Social Security tax?
Each employer withholds Social Security tax independently up to the wage base limit. If your combined wages from both jobs exceed the limit, you will have overpaid. You claim a credit on your Form 1040 when you file your return, and the IRS refunds the excess amount. You do not need to do anything during the year — the credit is automatic.
Do I pay FICA tax on a bonus?
Yes. Bonuses are wages and are subject to both income tax and FICA tax. Your employer withholds FICA at the same rate as your regular pay. If the bonus pushes you over the Social Security wage base limit, the Social Security portion is not withheld on the amount above the limit.
How is the additional Medicare tax calculated if I earn over the threshold?
The additional 0.9% Medicare tax applies only to wages above $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately). Your employer withholds it from your paycheck once your year-to-date wages cross that threshold. Unlike regular Medicare tax, there is no employer match — you pay the full amount.
Can I reduce my FICA tax the way I reduce my income tax?
No. FICA tax is not reduced by deductions or credits. It is calculated as a fixed percentage of wages with only the Social Security wage base limit as a cap. The only way to reduce FICA is to reduce your wages, which is not a practical strategy for most people.