What Is FICA Tax? Social Security and Medicare Explained (2026)

FICA stands for the Federal Insurance Contributions Act, and it funds two programs: Social Security and Medicare. Combined, they take 7.65% from every paycheck you earn — 6.2% for Social Security and 1.45% for Medicare. On a $75,000 salary, that’s $5,737.50 per year, or $220.67 per biweekly paycheck. For most workers, FICA costs more than state income tax.

Social Security tax (6.2%) has a wage base cap that adjusts annually for inflation. In 2026, the cap is $184,500 — meaning you stop paying Social Security tax after earning that amount. Maximum Social Security tax per worker: $11,439. If you earn $250,000, you pay the same $11,439 as someone earning $184,500. Above the cap, your effective SS rate drops. Medicare (1.45%) has no cap whatsoever — every dollar you earn is taxed.

High earners face an Additional Medicare Tax of 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly). This surtax, introduced by the Affordable Care Act, is paid only by the employee — employers don’t match it. A single filer earning $300,000 pays: 1.45% on all $300,000 ($4,350) plus 0.9% on $100,000 above the threshold ($900) = $5,250 total Medicare tax.

Your employer matches your FICA contributions dollar-for-dollar — they pay an additional 6.2% for Social Security and 1.45% for Medicare on your behalf. You never see this money, but it’s a real cost of employing you. On a $75,000 salary, your employer pays $5,737.50 in FICA taxes, bringing the total FICA contribution to $11,475. This is why your ‘total compensation cost’ to the company exceeds your salary by 7.65% or more.

Self-employed individuals pay both halves — the full 15.3% — through self-employment tax. On $100,000 of net self-employment income, that’s $14,130 (after the 92.35% calculation adjustment the IRS applies). The IRS does allow self-employed workers to deduct the employer-equivalent half (7.65%) from their gross income, which reduces income tax but doesn’t reduce the self-employment tax itself.

What you get back: Social Security benefits at retirement are based on your 35 highest-earning years. The average monthly Social Security benefit in 2026 is $1,976, with the maximum at $4,873 for those who earned at or above the wage cap for 35 years. Medicare provides health insurance starting at age 65. Whether FICA is a ‘good deal’ depends on your lifespan and health costs, but it’s not optional — every W-2 employee and self-employed worker pays it on every dollar earned.

A correction to the common shorthand: FICA is not 7.65% of your whole salary once you earn above the wage base. At $75,000 it is $5,738 (7.65%); at $250,000 it is $11,439 of Social Security plus $4,075 of Medicare, or 6.2% of pay; at $500,000 it is about 4.4%. The payroll tax is regressive above $184,500 by design — benefits are capped too — and that cap is the reason proposals to 'lift the cap' recur in every Social Security solvency debate.

What the wage base does year to year. It is indexed to average wages, not prices: $168,600 in 2024, $176,100 in 2025, $184,500 in 2026. A worker whose salary sits just above it pays Social Security on a larger share of pay each year even without a raise. The Additional Medicare Tax thresholds — $200,000 single, $250,000 joint, $125,000 married filing separately — are not indexed at all, so inflation pulls more earners across them every year; they were set in 2013 and have never moved.

Two FICA situations that catch people. First, two employers: each withholds Social Security up to the wage base separately, so someone who changes jobs mid-year at $150,000 can have $18,600 withheld across the two — $7,000 too much — and must claim the excess as a credit on Form 1040. Second, the Additional Medicare Tax: employers withhold it only once your wages with them pass $200,000, regardless of filing status or a spouse's income, so a married couple earning $150,000 each owes the 0.9% on $50,000 at filing with nothing withheld, while a single earner at $220,000 with a $30,000 bonus at a second job may be under-withheld as well.

FICA and pre-tax deductions. A traditional 401(k) contribution reduces income tax wages but not FICA wages; you pay the full 7.65% on it. Health, dental and vision premiums, HSA contributions and FSA contributions taken through a Section 125 cafeteria plan reduce FICA wages as well, which makes them the only payroll deductions that lower all three taxes at once. HSA contributions made outside payroll, by writing a check, get the income tax deduction but not the FICA exemption — a $4,400 self-only contribution through payroll saves about $337 of FICA that the same contribution made directly does not.

Who does not pay it. Students working for the school they attend, some state and local government employees covered by a public pension instead of Social Security (common for teachers in California, Texas, Illinois, Ohio, Massachusetts and a dozen other states), members of certain religious orders, and nonresident aliens on F-1 and J-1 visas are exempt from one or both halves. Railroad workers pay a parallel Railroad Retirement tax instead. Everyone else — including self-employed people through the 15.3% self-employment tax, minus the deductible employer half — pays on every dollar of earned income. Investment income, pensions, Social Security benefits and retirement-account withdrawals are not FICA wages, which is one reason retirees' effective tax rates fall even when their income does not.

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