- FICA taxes are withheld from paychecks to fund Social Security and Medicare programs.
- They are mandatory for most employees, employers, and self-employed individuals.
- Employers and employees evenly split the typical total FICA tax rate of 15.3%.
FICA stands for the Federal Insurance Contributions Act. It's the law that requires employers to withhold money from employees' paychecks to fund Social Security and Medicare. The vast majority of people in the U.S. who earn a wage or salary, or work for themselves, pay FICA taxes.
Components of the FICA tax
FICA tax, also known as a payroll tax, is made up of three parts:
- Social Security tax
- Medicare tax
- Additional Medicare tax
When you look at your paycheck, you'll see that your FICA taxes are taken out of your gross wages.
Most employees will see 6.2% taken out for Social Security and 1.45% for Medicare, for a total of 7.65%. Employers match those amounts, for a total of 15.3% of pay.
The Additional Medicare tax is levied on those with income of $200,000 or more and a single, head of household, or qualifying widower filing status. For married joint filers, the income threshold is $250,000.
2024 FICA tax rates and limits
Here's a breakdown of the FICA tax rates and limits for the 2024 tax year:
| To fund | Employee | Employer | Limit |
| Social Security | 6.2% | 6.2% | Employee and employer pay 6.2% only on the first $168,000 in 2024 |
| Medicare | 1.45% | 1.45% | No limit |
| Total | 7.65% | 7.65% | |
| Additional Medicare tax | 0.9% | Paid on Medicare earnings over $200,000 for single filers and $250,000 for couples filing jointly |
Who pays FICA tax?
The vast majority of people working in the U.S. — including the self-employed — have to pay FICA taxes. Employers withhold these taxes, in addition to federal and state income taxes, from employees' paychecks.
If you are self-employed, you'll still have to contribute funds to Social Security and Medicare. However, the taxes are levied on your net earnings instead of gross pay.
The Social Security and Medicare taxes are the same rates — 6.2% and 1.45%, respectively. But without a traditional employer in the picture, you'll be left to pay both halves of these by yourself. With that, you'll be footing the entire 15.3% total tax. You should pay these amounts and estimated income taxes in quarterly tax installments.
The good news is that you can deduct half of the self-employment tax as an adjustment to income on Schedule 1 of Form 1040.
There are a few exceptions to paying the FICA tax:
- You won't have to pay full FICA taxes on more than $168,600 of wages for the 2024 tax year (up from $160,200 in 2023).
- If the organization you work for qualifies for a specific religious exemption, you won't have to pay FICA taxes.
- Nonresident aliens working in the U.S. may not have to pay FICA taxes on their income.
- College students working a part-time job on campus may not have to pay FICA taxes depending on their enrollment status.
How FICA taxes are used
The Federal Insurance Contributions Act was passed in 1935 to create a funding mechanism for Social Security. However, the federal government did not begin to collect FICA payroll taxes until 1937. Since then, a Medicare payroll tax was added in 1965 to contribute to Medicare costs.
In essence, FICA taxes are designed to "provide a fallback security blanket to be covered financially and medically in old age," says Crystal Stranger, an enrolled agent and the CEO of Optic Tax.
While not meant to be a sole source of income after retirement, for workers who pay into these safety net programs, the extra funds and access to medical care in retirement or in the face of a disability can make a big difference.
Anyone born in 1929 or later needs to have at least 10 years of work or 40 credits to qualify for Social Security benefits. For 2024, you accumulate one credit for every $1,730 in covered earnings. There is a limit of four credits per year.
FAQs on the FICA tax
Can I avoid paying FICA tax?
No, you generally can't avoid paying the FICA tax. The vast majority of people in the U.S. who earn a wage or salary or are self-employed pay FICA taxes. Exceptions can include nonresident aliens working in the U.S. and college students working a part-time job on campus.
Can I avoid paying FICA tax if I'm self-employed?
If you're self-employed, you'll still have to contribute funds to Social Security and Medicare. However, the taxes are levied on your net earnings instead of gross pay and you'll pay both the employee and employer portions. On your annual tax return, you can get a deduction for one-half of the taxes paid.
How do FICA taxes affect my take-home pay?
FICA taxes affect your take-home pay, along with income taxes, by being deducted from your gross pay, lowering your take-home pay.
