FICA Tax Explained: Social Security and Medicare

Look at your pay stub and you'll see two deductions that aren't income tax: Social Security and Medicare. Together, they're called FICA taxes (Federal Insurance Contributions Act), and they take a combined 7.65% right off the top of every paycheck. For most workers, FICA is actually a bigger bite than federal income tax. Yet most people couldn't tell you exactly what they're paying or where the money goes.

Let's fix that. Here's a complete breakdown of FICA taxes, how they work, who pays what, and why the rules get a little different at higher incomes.

The Two Parts of FICA

FICA is made up of two separate taxes that fund two separate programs:

• Social Security tax (OASDI): 6.2% of your wages, up to an annual wage cap
• Medicare tax (HI): 1.45% of your wages, with no cap

Your employer pays an equal amount on top of your contribution, making the total FICA rate 15.3% (12.4% for Social Security + 2.9% for Medicare). If you're an employee, you pay 7.65% and your employer pays 7.65%. You'll see your half withheld on every paycheck.

Social Security Tax: The 6.2% With a Cap

The Social Security portion is 6.2% of every dollar you earn, but only up to the Social Security wage base. For 2025, that cap is $176,100. Once you've earned $176,100 in a calendar year, you stop paying Social Security tax on any additional income for the rest of the year.

Here's what that means in dollars: the maximum Social Security tax you can pay as an employee in 2025 is $10,918.20 ($176,100 times 6.2%). Whether you earn $176,100 or $500,000, your Social Security tax tops out at the same number.

The wage base is adjusted annually for inflation. It's been climbing steadily. In 2020 it was $137,700. In 2023 it was $160,200. In 2024 it was $168,600. The trend is clear: the cap goes up, and more of your income is subject to the tax each year.

If you hold multiple jobs, each employer withholds Social Security tax independently. If your combined wages exceed the cap, you may have overpaid. You can claim the excess as a credit when you file your tax return.

Medicare Tax: The 1.45% With No Cap

Unlike Social Security, Medicare tax has no wage base limit. You pay 1.45% on every single dollar of earned income, whether you make $30,000 or $3 million. There's no upper boundary. Your employer matches this at 1.45%, for a combined rate of 2.9%.

For most workers, this is the simpler of the two. No caps to track, no thresholds to worry about, just a flat 1.45% from the first dollar to the last.

Additional Medicare Tax: The 0.9% Surcharge

Here's where it gets a bit more complex. Since 2013, there's been an additional Medicare tax of 0.9% on earned income above certain thresholds. This was introduced as part of the Affordable Care Act. The thresholds are:

• Single filer: Income over $200,000
• Married filing jointly: Combined income over $250,000
• Married filing separately: Income over $125,000

This additional 0.9% is paid only by the employee. Your employer does not match it. So if you're a single filer earning $250,000, here's your total Medicare tax:

• 1.45% on all $250,000 = $3,625
• 0.9% on the $50,000 above $200,000 = $450
• Total Medicare tax: $4,075

Note that these thresholds have never been adjusted for inflation since they were set in 2013. As wages grow, more and more workers are crossing the $200,000/$250,000 line. This is sometimes called "bracket creep" applied to FICA.

Calculate Your Total Tax Burden

Use the calculator below to see how FICA taxes combine with your federal income tax. Understanding the full picture helps you plan better and avoid surprises when reviewing your pay stubs.

FICA for Self-Employed Workers

If you're self-employed, you pay both the employee and employer portions of FICA. This is called self-employment tax, and the combined rate is 15.3% on your net self-employment income (12.4% for Social Security + 2.9% for Medicare), plus the 0.9% additional Medicare tax if applicable.

There's some relief: you can deduct the employer-equivalent portion (half of your self-employment tax) as an adjustment to your gross income. This doesn't reduce your self-employment tax itself, but it does lower your income tax. You also calculate self-employment tax on 92.35% of your net earnings (rather than 100%), which approximates the fact that employees effectively get their employer's share "for free."

Let's say you have $100,000 in net self-employment income:

• Taxable base: $100,000 times 92.35% = $92,350
• Social Security: $92,350 times 12.4% = $11,451.40
• Medicare: $92,350 times 2.9% = $2,678.15
• Total self-employment tax: $14,129.55
• Deductible portion (half): $7,064.78

That's a significant amount on top of your income tax. Many freelancers and gig workers are surprised by this when they file their first self-employment return.

What FICA Pays For

It's worth understanding what you get for your money:

• Social Security (6.2%): Funds retirement benefits, disability benefits (SSDI), and survivor benefits. When you retire, your Social Security benefit is calculated based on your 35 highest-earning years. The more you earn (up to the wage base), the higher your eventual benefit.
• Medicare (1.45% + 0.9%): Funds Medicare Part A (hospital insurance) for people age 65 and older and certain disabled individuals. Most people don't pay a premium for Medicare Part A because they paid into it through FICA taxes during their working years.

Unlike income tax, which goes into the government's general fund, FICA taxes are earmarked specifically for these programs. There's a direct link between what you pay in and what you eventually receive. According to the Social Security Administration, the average monthly Social Security retirement benefit in early 2025 is about $1,976, though the maximum benefit for someone retiring at full retirement age is considerably higher.

FICA vs. Income Tax: Which Hits Harder?

For many workers, FICA actually takes a bigger bite than federal income tax. Consider someone earning $50,000:

• FICA (employee share): $50,000 times 7.65% = $3,825
• Federal income tax: After the standard deduction, their taxable income is $35,000. The tax on that is about $3,820.

They're almost identical. And unlike income tax, FICA has no standard deduction, no personal exemptions, and no lower brackets. It's 7.65% from dollar one. For workers earning under about $50,000, FICA is often the single largest federal tax they pay.

Key Differences From Income Tax

• No deductions or credits apply to FICA. Your 401(k) contributions reduce your income tax but not your FICA obligation. The standard deduction doesn't affect FICA either.
• FICA only applies to earned income. Investment income, rental income, and capital gains are not subject to FICA (though some investment income may be subject to the separate Net Investment Income Tax of 3.8%).
• FICA is regressive at higher incomes. Because of the Social Security wage cap, someone earning $176,100 and someone earning $500,000 pay the same amount of Social Security tax. As a percentage of total income, the higher earner pays less.

The Bottom Line

FICA taxes are unavoidable for anyone earning a paycheck or running a business. At 7.65% for employees (and 15.3% for the self-employed), they represent a significant portion of your total tax burden. The Social Security tax has a cap at $176,100 for 2025, Medicare has no cap, and high earners face an additional 0.9% Medicare surcharge. Understanding these numbers helps you accurately estimate your take-home pay, plan for self-employment costs, and appreciate the full scope of what the government takes before your money reaches your bank account. When you're budgeting or negotiating salary, don't just think about income tax. FICA is the other half of the equation.