What Is FICA? Social Security and Medicare Taxes on Your Paycheck, Explained

Every paycheck stub shows two deduction lines most employees recognize but rarely understand: Social Security and Medicare. Together they're called FICA — the Federal Insurance Contributions Act — and they're withheld automatically before you ever see your money. Unlike income taxes, FICA rates are flat and apply to virtually every earned dollar. This guide breaks down exactly what each tax is, how it's calculated, what reduces it, and what happens on your employer's side.

The two taxes inside FICA

Social Security (OASDI): 6.2% up to the wage base

Social Security is formally titled OASDI — Old-Age, Survivors, and Disability Insurance. The employee rate is 6.2% of your FICA-taxable wages, but only up to the annual Social Security wage base. For 2026, that cap is $184,500.

Once your cumulative wages for the calendar year exceed $184,500, Social Security withholding stops completely. You'll notice this as a take-home bump — sometimes several hundred dollars per paycheck — later in the year. The SSA announces the new wage base each October for the following year; it adjusts annually based on average wage growth in the national economy.

Medicare (HI): 1.45% on all wages

Medicare is formally titled HI — Hospital Insurance. The employee rate is 1.45% of all wages, with no ceiling. Unlike Social Security, Medicare withholding never stops — it applies to your last dollar of wages just as much as your first.

Additional Medicare Tax: 0.9% above $200,000

A third layer applies to high earners under IRC §3101(b)(2): the Additional Medicare Tax of 0.9% on wages above $200,000 for single filers ($250,000 for married filing jointly, $125,000 for married filing separately). Your employer withholds this once your wages paid by that employer cross $200,000 in the calendar year. Your true threshold based on filing status is reconciled on Form 1040 — if two jobs each pay $150,000, neither employer crosses the $200,000 trigger alone, but you owe the 0.9% on the $100,000 combined overage.

Combined rates at a glance

For most employees earning under $184,500, the effective employee FICA rate is 7.65% of gross pay on every paycheck.

A worked example

Say you earn $80,000 per year, paid biweekly (26 paychecks). Your gross pay per paycheck is $80,000 ÷ 26 = $3,076.92.

Over 26 pay periods, you'll pay $235.38 × 26 = $6,120.00 in FICA for the year — $4,960.00 in Social Security and $1,160.00 in Medicare.

Your employer pays FICA too — on top of your salary

FICA is a shared tax. Under IRC §3111, employers pay a matching contribution:

• 6.2% Social Security on wages up to the wage base
• 1.45% Medicare on all wages (no ceiling)

Every dollar you earn costs your employer an additional 7.65% in payroll taxes on top of your salary — not from your paycheck, but from their operating budget. Employers do not pay the Additional Medicare Tax; that 0.9% applies to employees only.

Self-employed individuals pay both the employee and employer shares (15.3%) as self-employment tax under IRC §1401 — though they can deduct half of it on their federal income tax return as a business expense.

Pre-tax benefits can reduce what FICA applies to

Not all deductions reduce your FICA-taxable wages equally. Under IRC §3121(a)(5), contributions made through a Section 125 cafeteria plan are excluded from FICA-taxable wages. These include:

• Employer-sponsored health insurance (employee premium share)
• Dental and vision insurance premiums
• Flexible Spending Account (FSA) contributions
• Health Savings Account (HSA) contributions made via payroll

If you contribute $150/paycheck to health insurance through your employer's cafeteria plan, FICA is calculated on your gross minus $150. At the 7.65% combined rate, that saves approximately $11.48/paycheck in FICA — a small but real benefit of choosing pre-tax benefits over higher take-home.

What does not reduce FICA-taxable wages: 401(k) pre-tax contributions. Under IRC §3121(a), wages deferred into a traditional 401(k) are excluded from federal income tax withholding but remain fully subject to FICA. You pay Social Security and Medicare on every 401(k) dollar you contribute.

Where FICA money goes

Social Security funds retirement benefits (claimable between ages 62 and 70), disability insurance (SSDI), and survivor benefits for dependents of deceased workers. Medicare funds hospital insurance (Part A) for people aged 65 and older and for those with qualifying disabilities.

The connection between what you pay in and what you eventually receive is not direct — FICA taxes fund current beneficiaries, not a personal savings account. However, your cumulative earnings history (the wage record on which FICA was paid) does determine your future Social Security benefit amounts, which SSA tracks in your my Social Security account.

What FICA doesn't cover

This guide covers FICA only — Social Security and Medicare. Federal income tax withholding and state income tax withholding depend on your W-4 elections, filing status, and state rules, and are not part of FICA. For most employees, federal income tax is the largest single deduction on their stub — but it's a separate calculation entirely.

The paycheck calculator below models the full FICA waterfall for your specific gross pay and pre-tax deductions.

This guide is for informational and educational purposes only. It is not financial, tax, or legal advice. Tax rules are complex and subject to change. Consult a qualified professional before making financial decisions based on this content.

Last reviewed: June 2026 · Source: IRS Publication 15 (Circular E) and SSA.gov.