FICA takes 15.3% of your wages, split between you and your employer

FICA (Federal Insurance Contributions Act) consists of two taxes: Social Security at 6.2% and Medicare at 2.9%. If you are an employee, your employer withholds 6.2% + 2.9% = 15.3% total from your paycheck. Your employer also pays an equal 15.3% on your behalf, though you do not see that amount. If you are self-employed, you pay both sides yourself: 12.4% for Social Security and 2.9% for Medicare, totaling 15.3%.

The Social Security portion (6.2%) only applies to wages up to a cap. For 2024, that cap is $168,600. Once you earn more than that in a year, Social Security tax stops. Medicare (2.9%) has no cap — it applies to all your wages. High earners also pay an additional 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).

Key Takeaways

  • Employees pay 6.2% Social Security and 2.9% Medicare from each paycheck; employers pay the same amount on top.
  • Social Security tax stops once you hit the annual wage cap ($168,600 in 2024), but Medicare continues on all earnings.
  • Self-employed people pay both the employee and employer share, totaling 15.3%, though they can deduct half on their tax return.
  • High earners pay an extra 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).
  • FICA withholding appears on your pay stub and reduces your take-home pay when ready.

How FICA appears on your pay stub

Your pay stub shows FICA as two separate line items: Social Security and Medicare. If you earn $3,000 in a pay period, you will see roughly $186 withheld for Social Security (6.2% × $3,000) and $87 for Medicare (2.9% × $3,000), totaling $273 before any federal or state income tax. This amount comes directly out of your gross pay.

The employer's share does not appear on your pay stub — it is a cost to your employer that you do not see. But it is real money. If you earn $50,000 a year, your employer pays about $7,650 in FICA on your behalf while you pay $3,825 from your paycheck.

The Social Security wage cap and why it matters

Social Security tax stops once you reach the annual cap. In 2024, the cap is $168,600. If you earn $200,000, you pay Social Security tax only on the first $168,600. The remaining $31,400 is not subject to Social Security tax (though it is still subject to Medicare).

This cap changes each year based on wage growth. The Social Security Administration announces the new cap in October for the following year. High earners benefit from this cap because their effective Social Security tax rate drops as income rises. Someone earning $500,000 pays the same total Social Security tax as someone earning $168,600.

Self-employed FICA: paying both sides

If you are self-employed, you pay both the employee and employer portion of FICA. That is 12.4% for Social Security (up to the wage cap) and 2.9% for Medicare, totaling 15.3% of your net self-employment income. You calculate this on Schedule SE (Form 1040) when you file your tax return.

The upside: you can deduct half of your self-employment tax on your Form 1040. If you owe $4,590 in self-employment tax, you deduct $2,295, which lowers your taxable income. This deduction does not reduce the FICA tax itself, but it does reduce your federal income tax. Self-employed people should set aside roughly 15% of their net income to cover FICA when they file.

The additional Medicare tax for high earners

If you earn above certain thresholds, you pay an extra 0.9% Medicare tax. The thresholds are $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. This additional tax applies to wages above the threshold.

Your employer withholds this automatically once you cross the threshold in a given year. If you have multiple jobs and your combined wages exceed the threshold, you may overpay this tax during the year and claim a refund when you file your return. Self-employed people calculate this on Schedule SE and pay it with their self-employment tax.

What FICA funds and when you see the benefit

Social Security tax funds retirement, disability, and survivor benefits. Medicare tax funds hospital insurance (Part A), which covers inpatient care, skilled nursing, hospice, and home health. You become may be able to access for Social Security retirement benefits at age 62 (reduced) or your full retirement age (67 or 68, depending on birth year). Medicare may be able to access begins at 65.

FICA is a pay-as-you-go system: current workers' taxes fund current retirees' benefits. Your FICA contributions create a record of earnings that determines your future benefit amount. The Social Security Administration tracks this record and uses it to calculate your benefit when you claim.

Reducing FICA through pre-tax retirement contributions

Contributions to a traditional 401(k) or 403(b) reduce your federal income tax, but they do not reduce FICA. You still pay Social Security and Medicare tax on money you contribute to these plans. However, contributions to a Health Savings Account (HSA) do reduce FICA. If you contribute $4,000 to an HSA, you avoid FICA tax on that $4,000.

This is one reason HSAs are valuable for tax planning: they reduce income tax, FICA, and state tax (in most states) all at once. Traditional IRAs do not reduce FICA either — only employer-sponsored plans and HSAs do. If you are self-employed, you cannot reduce your self-employment tax through retirement contributions, though you can deduct the contributions themselves from income tax.

Frequently Asked Questions

What happens to FICA if I change jobs mid-year?

You continue paying Social Security tax at each job until you hit the annual cap across all employers. If you earn $100,000 at Job A and then $80,000 at Job B, you will overpay Social Security tax because each employer withholds based on their own payroll only. You can claim the overpayment as a credit on your tax return when you file.

Do I pay FICA on tips?

Yes. Tips are treated as wages for FICA purposes. You and your employer both owe FICA on reported tips. If you receive tips, report them to your employer so they can withhold FICA correctly.

Can I opt out of FICA?

No. FICA is mandatory for all employees and self-employed people. The only exceptions are certain religious groups and some government employees with their own pension systems, and those exemptions are rare and require advance approval.

Does FICA explore to investment income or rental income?

No. FICA applies only to wages and self-employment income. Interest, dividends, capital gains, and rental income are not subject to FICA, though they may be subject to federal income tax.

What if my employer did not withhold FICA?

Report it to your employer when ready. They are required by law to withhold and remit FICA. If they fail to do so, contact the IRS or your state labor department. You may also owe the tax yourself if your employer does not pay it.