What Is FICA Tax? Social Security and Medicare Explained

Every paycheck shows two deductions that confuse most workers: Social Security and Medicare, collectively called FICA tax. Together they take 7.65% of your gross pay before you see a dollar — and your employer pays another 7.65% on top. Here’s exactly what FICA is, how it works, and what you get in return.

What Does FICA Stand For?

FICA stands for the Federal Insurance Contributions Act, the 1935 law that created Social Security payroll taxes. Medicare was added in 1965. Both programs are funded entirely through these payroll deductions, separate from the income taxes that go through federal tax brackets.

Unlike federal income tax, which is progressive and depends on your total income and filing status, FICA is a flat tax on earned income up to a certain ceiling.

The Two Components of FICA

Social Security (6.2%)

• Employee rate: 6.2% of wages
• Employer match: 6.2%
• Wage base limit (2026): $176,100

You pay 6.2% on every dollar you earn up to $176,100. Once your earnings cross that threshold for the year, Social Security tax stops. This cap is adjusted annually for inflation.

Example: If you earn $80,000/year, your Social Security tax is $80,000 × 6.2% = $4,960.

Medicare (1.45%)

• Employee rate: 1.45%
• Employer match: 1.45%
• No wage cap — you pay on every dollar earned

Higher earners face an additional 0.9% Additional Medicare Tax on wages above:

• $200,000 for single filers
• $250,000 for married filing jointly
• $125,000 for married filing separately

This additional 0.9% is not matched by the employer.

Total FICA Rates at a Glance

Component	Employee	Employer	Total
Social Security	6.2%	6.2%	12.4%
Medicare	1.45%	1.45%	2.9%
FICA Total	7.65%	7.65%	15.3%

How FICA Appears on Your Paycheck

On your pay stub, FICA appears as two separate line items:

• OASDI or Social Security Tax — the 6.2%
• Medicare Tax or Med Tax — the 1.45%

You’ll see these on your W-2 in Boxes 4 (Social Security tax withheld) and 6 (Medicare tax withheld). For a full walkthrough of every line on your stub, see our guide on how to read a pay stub.

Self-Employed Workers Pay Double

If you’re self-employed, freelancing, or running a business, you pay both the employee and employer halves — that’s 15.3% self-employment tax on net earnings. This is why self-employment feels so much more expensive on paper.

The IRS does offer a partial offset: self-employed workers can deduct half of their self-employment tax (the employer portion) when calculating their adjusted gross income. This reduces your federal income tax but not the SE tax itself.

What You Get in Return

Social Security Benefits

Contributing to Social Security builds your eligibility for benefits you can estimate with the Social Security tax calculator:

• Retirement benefits: Available starting at age 62 (reduced) or full retirement age (66–67 depending on birth year). Monthly benefit is based on your 35 highest-earning years.
• Disability benefits (SSDI): If you become unable to work, Social Security can provide income replacement.
• Survivor benefits: Your spouse and dependent children may receive benefits if you die.

The more you earn (up to the wage cap), the higher your eventual benefit — up to a point. The formula is progressive, replacing a higher percentage of lower wages.

Medicare Benefits

Medicare taxes paid now fund your health insurance starting at age 65:

• Part A (hospital insurance): Free if you’ve paid Medicare taxes for at least 10 years
• Part B (outpatient services): Monthly premium required (~$185/month in 2026)
• Part D (prescription drugs): Separate plan with its own premium

FICA vs. Federal Income Tax

These are two completely separate systems:

	FICA	Federal Income Tax
Rate	Flat 7.65%	Progressive 10–37%
Applies to	Earned wages only	Most income types
Wage cap	Yes (Social Security)	No
Funding	Social programs	General government
Filed via	W-2 withholding	Form 1040

Your paycheck calculator accounts for both — FICA is always calculated first, on gross wages, before any deductions that might reduce your income tax base.

Can You Reduce FICA?

Unlike federal income tax, there are very few legal ways to reduce FICA:

• Section 125 Cafeteria Plans: Health insurance premiums paid pre-tax through your employer reduce FICA wages
• HSA contributions via payroll deduction reduce FICA wages
• Dependent care FSA: Up to $5,000 in employer-sponsored dependent care is exempt from FICA
• 401(k) contributions: Do NOT reduce FICA — you pay Social Security and Medicare on contributions before the deferral

This distinction matters: your 401(k) contribution reduces your federal and state income tax, but FICA is calculated on gross wages regardless.

The Wage Base Limit in Context

The $176,100 Social Security wage cap means someone earning $200,000 pays the same dollar amount in Social Security tax as someone earning $176,100. As a percentage of total income, higher earners pay a smaller share — which is why FICA is considered a regressive element of the tax system relative to earned income.

The Medicare tax, however, has no cap and adds a 0.9% surcharge above $200,000, which makes the overall FICA structure slightly more progressive at the top.

Key Takeaways

• FICA = 6.2% Social Security + 1.45% Medicare = 7.65% total from your paycheck
• Your employer pays a matching 7.65% on top — you’re not seeing half the cost
• Social Security has a $176,100 wage cap in 2026; Medicare has no cap
• Self-employed workers pay 15.3% self-employment tax (both halves)
• Pre-tax health insurance and HSA contributions reduce FICA; 401(k) contributions do not
• Use the paycheck calculator to see exactly how FICA affects your take-home pay