If you’ve ever reviewed your paycheck and noticed deductions for FICA taxes, you may have wondered how they’re calculated and why they matter. From understanding what the FICA tax is to knowing how the FICA tax rate and overall FICA tax percentage affect your earnings, these payroll taxes play a key role in funding federal benefit programs. Learning how the FICA Social Security tax works and how the annual FICA tax limit applies can help you better understand your take-home pay and future benefits.
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What Is FICA Tax?
FICA tax is a U.S. payroll tax required by the Federal Insurance Contributions Act that helps fund Social Security and Medicare. It is automatically deducted from employee paychecks and matched by employers. FICA taxes ensure workers receive benefits such as retirement income, disability coverage, and healthcare support later in life.
What Is Included in FICA Tax?
FICA tax includes two main components that fund key U.S. federal benefit programs:
- Social Security Tax: This portion funds retirement, disability, and survivor benefits. A fixed percentage of an employee’s wages is withheld up to an annual FICA tax limit, after which no additional Social Security tax is deducted for the year.
- Medicare Tax: This portion supports healthcare coverage for people age 65 and older and certain individuals with disabilities. Unlike Social Security, the Medicare tax has no wage limit, and higher earners may owe an additional Medicare tax once their income exceeds a set threshold.
Together, these components make up FICA taxes, which are split between employees and employers and automatically deducted from paychecks.
What FICA Taxes Are Used For
- Social Security Benefits: The FICA SS tax helps provide retirement income, disability coverage, and survivor benefits for eligible workers and their families.
- Medicare Benefits: Funds from FICA taxes support hospital care, medical services, and healthcare costs for seniors and certain disabled individuals.
Is FICA the Same as Federal Income Tax?
No, FICA taxes are not the same as federal income tax. FICA is a payroll tax that specifically funds social security and medicare programs. Employees pay 6.2% for Social Security and 1.45% for Medicare, with an additional 0.9% Medicare tax for high earners above certain thresholds. Employers also match these contributions, directly supporting these social insurance programs.
On the other hand, federal income tax is collected to fund the general operations of the federal government, including defense, education, and public services. It is calculated based on taxable income, filing status, and claimed deductions or credits. Unlike FICA, federal income tax is not tied to any specific benefits and varies depending on your overall income and tax situation.
FICA Tax Rates for 2025–2026
Here are the FICA tax rates for the 2025–2026 tax years (covering Social Security and Medicare withholding):
| Tax Component | 2025 | 2026 |
| Social Security tax rate (employee) | 6.2% up to $176,100 | 6.2% up to $184,500 |
| Medicare tax rate (employee) | 1.45% (no limit) | 1.45% (no limit) |
| Total standard FICA rate | 7.65% | 7.65% |
| Additional Medicare tax | 0.9% above income thresholds $200,000 for single filers $250,000 for married couples filing jointly $125,000 for married individuals filing separately | 0.9% above income thresholds $200,000 for single filers $250,000 for married couples filing jointly $125,000 for married individuals filing separately |
How Much Is FICA Tax for Self-Employed Individuals
Self-employed individuals pay both the employee and employer portions of FICA taxes through the Self-Employment (SE) tax. This covers Social Security and Medicare contributions:
1. Social Security Tax
- Rate: 12.4% of net earnings
- Wage limit: $176,100 for 2025, $184,500 for 2026
- Purpose: Funds retirement, disability, and survivor benefits
2. Medicare Tax
- Rate: 2.9% of net earnings (employee + employer portion)
- Additional Medicare tax: 0.9% on income above:
- $200,000 for single filers
- $250,000 for married filing jointly
- $125,000 for married filing separately
- $200,000 for single filers
- Purpose: Funds healthcare for seniors and certain disabled individuals
How to Calculate FICA Tax
Calculating FICA taxes involves figuring out both the Social Security and Medicare portions of your wages. The process differs slightly for employees and self-employed individuals.
1. For Employees
- Determine your taxable wages: Your gross wages are usually subject to FICA, up to the Social Security wage limit for the year.
- Calculate Social Security tax: Multiply your wages (up to the limit) by 6.2%.
- Calculate Medicare tax: Multiply your entire wages by 1.45%.
- Check for Additional Medicare Tax: If your wages exceed the thresholds ($200,000 single, $250,000 married filing jointly, $125,000 married filing separately), apply 0.9% to the excess amount.
- Add Social Security and Medicare taxes: This gives your total FICA tax.
2. For Self-Employed Individuals
Self-employed people pay both the employee and employer portions:
- Determine net earnings from self-employment.
- Social Security portion: Multiply net earnings (up to the wage limit) by 12.4%.
- Medicare portion: Multiply net earnings by 2.9%.
- Additional Medicare tax: Apply 0.9% on earnings above the thresholds.
- Total SE tax: Add Social Security and Medicare portions.
Who Is Exempt From FICA Taxes?
While most workers in the U.S. pay FICA taxes, there are certain groups of people who may be partially or fully exempt:
- Certain Students: Students who work at the school where they are enrolled may be exempt from FICA taxes on wages earned from that employment.
- Some Nonresident Aliens: Nonresident aliens on specific visas (such as F-1, J-1, M-1, or Q-1/Q-2) may be exempt from FICA taxes for work related to their visa status.
- Some State and Local Government Employees: Employees of state or local governments who participate in alternative retirement systems instead of Social Security may be exempt from the FICA SS tax (they may still pay Medicare tax).
- Certain Religious Groups: Members of recognized religious sects who oppose insurance may request exemption from both Social Security and Medicare taxes.
- Some Household Employees: Casual household employees may not be subject to FICA taxes if their wages are below a specific threshold.
Note: Exemptions usually apply to specific situations and are subject to rules by the IRS. It’s important to confirm eligibility before claiming an exemption.
How FICA Taxes Affect Your Retirement Benefits
The contributions you make through FICA taxes directly determine your Social Security retirement benefits, also known as the Primary Insurance Amount (PIA). The Social Security Administration calculates your PIA using the Average Indexed Monthly Earnings (AIME) formula. In simple terms, it looks at your highest 35 years of earnings, adjusts them for current wage levels, averages them, and then applies specific percentages to determine your monthly benefit.
Several additional factors influence the benefits you receive:
- When you start taking benefits: Claiming early reduces monthly payments, while delaying increases them.
- Your spouse’s lifetime earnings: Spousal benefits may apply.
- Survivor benefits: If your spouse passes away, you may be eligible for survivor benefits.
- Marital status and relationships: These can affect eligibility for certain benefits.
To get a personalized estimate, you can use the Social Security Administration’s online calculator, which provides a projection based on your actual earnings history. This helps you see exactly how your FICA SS tax contributions today will impact your retirement income in the future.
Note: This content is intended for general informational purposes and should not be considered legal, tax, or financial advice.
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