The basic split: employees and employers share the load

FICA tax is split between you and your employer if you work as an employee. You pay half through payroll deductions, and your employer pays the other half directly to the IRS. The rate is the same for both sides: 6.2% for Social Security and 1.45% for Medicare, totaling 7.65%. Your employer withholds your portion from each paycheck; you never write a check for it yourself.

This split exists because Congress decided in 1935 that both parties benefit from the system. Your employer gets a tax deduction for their half, which effectively lowers their cost. You see your half taken from your gross pay before taxes, which reduces your taxable income slightly. The result is that the true cost of FICA is shared, though the mechanics make it invisible to most employees.

The employer's half is not optional and does not depend on how much you earn. If you make $30,000 or $300,000, your employer pays the same percentage on your wages. There is no cap on Medicare tax (though there is on Social Security — earnings above a certain threshold, which changes yearly, are not subject to the 6.2% Social Security portion).

Key Takeaways

  • Employees pay 6.2% for Social Security and 1.45% for Medicare through payroll deduction, while employers pay an equal amount on top of your wages.
  • Self-employed people pay both halves themselves — 12.4% for Social Security and 2.9% for Medicare — because they are both employee and employer.
  • Your employer's FICA contribution is a business expense they deduct, but it does not reduce your reported wages on your W-2.
  • Social Security tax stops once you hit the annual wage cap, but Medicare tax continues on all earnings with no limit.
  • High-income earners pay an additional 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).

Self-employed workers pay both halves

If you are self-employed, you pay the full FICA burden yourself: 12.4% for Social Security and 2.9% for Medicare. This is called self-employment tax, and you calculate it on Schedule SE (Form 1040). You pay it when you file your tax return, usually in quarterly installments through estimated tax payments.

The self-employment tax rate is higher than what an employee pays, but the tax code gives you a partial offset. You can deduct half of your self-employment tax as an adjustment to income on your Form 1040, which lowers your taxable income. This deduction does not eliminate the cost, but it reduces it by roughly 7.65% of what you owe. A tax professional can show you the exact math for your situation.

Self-employment tax applies to net earnings from your business — not gross revenue. If you run a side business and earn $5,000 after expenses, you owe self-employment tax on approximately $5,000 (after a small adjustment). If you have a loss, you owe nothing.

The wage cap affects Social Security but not Medicare

Social Security tax has an annual wage base limit. Once your earnings hit that threshold in a calendar year, you stop paying the 6.2% Social Security portion for the rest of the year. The limit changes every year based on wage growth; it was $168,600 in 2024, but you should check the current year's figure on the Social Security Administration website.

Medicare tax has no wage cap. You pay 1.45% on every dollar you earn, no matter how high your income goes. This is why high earners' FICA burden is mostly Medicare, not Social Security.

If you work for multiple employers in the same year, each one withholds Social Security tax up to the cap independently. You might overpay if your combined earnings exceed the limit. When you file your tax return, you can claim a credit for the overpayment, and the IRS refunds it.

High earners pay extra Medicare tax

Employees earning above $200,000 (single) or $250,000 (married filing jointly) pay an additional 0.9% Medicare tax on the excess. Self-employed people pay this on net self-employment income above the same thresholds. This extra tax has no wage cap and no employer match — if you are self-employed, you pay all 0.9% yourself.

Your employer withholds this extra tax automatically if your W-2 wages cross the threshold. If you have multiple jobs or self-employment income, the withholding may not be correct, and you might owe more when you file your return.

What your employer reports and deducts

Your employer reports your gross wages and their FICA contribution on your W-2 form in Box 1 (wages) and Boxes 5 and 6 (Medicare and Social Security wages). The employer's half of FICA does not appear on your W-2 — it is a business expense they report on their own tax return.

This distinction matters for understanding your true compensation. If you earn $50,000 in wages, your employer has actually spent roughly $53,825 on you when you add their FICA contribution. But you only see $50,000 on your W-2, and your paycheck is less because your half of FICA is withheld.

The employer's deduction for FICA is not discretionary. It is a mandatory business expense, just like rent or utilities. The IRS does not allow employers to avoid it by classifying workers differently or using independent contractors (though misclassification happens and carries penalties).

How FICA differs from income tax withholding

FICA and income tax withholding are separate. Your employer withholds both from your paycheck, but they go to different places and fund different programs. FICA funds Social Security and Medicare. Income tax withholding funds the general Treasury.

You can adjust your income tax withholding by filing a new W-4 form with your employer. You cannot adjust FICA withholding — it is fixed by law. If you want to reduce FICA, your only option is to reduce your earnings or change your employment status (for example, by becoming self-employed, though that usually increases your total FICA burden).

State and local taxes on top of FICA

Some states and cities impose additional payroll taxes that work similarly to FICA. New York City, for example, has a local income tax that is withheld from paychecks. These are separate from FICA and do not fund Social Security or Medicare. Your employer handles the withholding and remittance, but the rates and rules vary by location.

If you move to a different state or city during the year, your withholding may change. Check with your payroll department or a tax professional if you are unsure whether your new location has additional payroll taxes.

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 (like some Amish communities) who have received IRS approval to opt out, and some government employees hired before specific dates who are covered by alternative pension systems. For nearly everyone else, FICA is non-negotiable.

What happens to the FICA money I pay?

Your Social Security tax funds current Social Security benefits paid to retirees, disabled workers, and survivors. Your Medicare tax funds Medicare Part A (hospital insurance). The money does not sit in an account with your name on it; it goes into a common pool. When you retire, you draw from that pool based on your earnings history and age.

If my employer pays half, why do I see it on my paycheck?

Your half of FICA is withheld from your gross pay before you receive your paycheck. Your employer's half is paid separately to the IRS and does not appear on your paycheck. The two halves are equal, but only yours is visible to you because it reduces your take-home pay.

Do I pay FICA on bonuses and commissions?

Yes. FICA applies to all wages and compensation, including bonuses, commissions, overtime, and most fringe benefits. Your employer withholds FICA on these just as they do on regular salary. The Social Security portion still stops once you hit the annual wage cap.

What if I am both an employee and self-employed?

You pay employee FICA on your W-2 wages and self-employment tax on your net self-employment income. If your combined earnings exceed the Social Security wage cap, you may overpay Social Security tax, which you can claim as a credit on your tax return. A tax professional can help you navigate this situation.