What Is FICA? Social Security & Medicare Explained

The Line Item You Can't Escape

Look at your pay stub. You will see a deduction for FICA.

It stands for Federal Insurance Contributions Act. It is the federal payroll tax that funds Social Security and Medicare.

Unlike income tax, which has a standard deduction and progressive brackets, FICA starts at dollar one.

The Breakdown (7.65%)

1. Social Security (6.2%)

This funds the retirement, disability, and survivorship benefits for millions of Americans.

• The Cap: In 2024, you only pay this on the first $168,600 of earnings. If you make more than that, the 6.2% deduction stops for the rest of the year.

2. Medicare (1.45%)

This funds health insurance for people over 65 and those with disabilities.

• No Cap: You pay this on all earned income.
• Additional Tax: High earners (>$200k single) pay an extra 0.9% (total 2.35%).

Employer Match

Here is a secret: You are only paying half. Your employer also pays 6.2% for Social Security and 1.45% for Medicare on your behalf.

Self-Employed? If you are a freelancer or contractor, you have to pay both halves (15.3%). This is called the Self-Employment Tax.

Summary

FICA is a mandatory contribution to the social safety net. While it reduces your take-home pay today, it builds your eligibility for benefits in the future.

See exactly how much FICA costs you with our Paycheck Calculator.