FICA

FICA is the payroll tax that funds Social Security and Medicare in the US. It's split evenly between you and your employer, each paying 7.65% of your wages, for a combined 15.3% going toward these two federal programs.

The Social Security portion (6.2% each side) only applies up to an annual wage base limit, after which it stops for the rest of the year. The Medicare portion (1.45% each side) has no cap and applies to every dollar you earn. FICA withholding shows up on your W-2 in Boxes 4 and 6.

FICA Withheld (Employee) = (Wages up to SS Wage Base × 6.2%) + (All Wages × 1.45%)

Self-employed individuals pay both halves through self-employment tax, calculated at 15.3% on net self-employment income.

An employee earning $90,000 in a year, well under the Social Security wage base:

• Social Security: $90,000 × 6.2% = $5,580
• Medicare: $90,000 × 1.45% = $1,305
• Total FICA withheld from the employee: $6,885

Their employer separately pays another $6,885 in matching FICA, a cost that doesn't reduce the employee's paycheck but does add to what it costs the employer to hire them.

• The Social Security wage base rises almost every year with inflation. Once your year-to-date wages cross that threshold, the 6.2% Social Security withholding stops for the rest of the year, though Medicare withholding continues.
• High earners pay an extra 0.9% Medicare surtax. This applies above income thresholds set by filing status, and it's not matched by the employer.
• Self-employed workers pay double through self-employment tax. With no employer to split the cost, freelancers and business owners cover the full 15.3% themselves, though half is deductible against income tax.
• FICA funds specific programs, not general revenue. Unlike income tax, FICA contributions are earmarked for Social Security and Medicare trust funds.
• Multiple employers in one year can lead to over-withholding. If your combined Social Security wages across jobs exceed the annual cap, you can claim the excess back when filing.