FICA Tax: Social Security and Medicare Explained
How FICA works
FICA is automatically withheld from every paycheck. The employee pays half and the employer matches the other half. For a $1,000 paycheck:
- Employee Social Security: $62 (6.2%)
- Employee Medicare: $14.50 (1.45%)
- Employee total FICA withheld: $76.50
- Employer Social Security match: $62
- Employer Medicare match: $14.50
- Employer total FICA paid: $76.50
The combined FICA contribution: $153 (15.3% of the paycheck) goes to fund Social Security retirement benefits and Medicare healthcare for seniors.
2026 FICA wage caps
- Social Security wage base: $176,100 (estimated 2026; updated annually). Income above this is not subject to Social Security tax.
- Medicare: no wage cap; all wages are taxed at 1.45%
- Additional Medicare Tax: extra 0.9% on wages over $200K (single) or $250K (married joint). Employee-paid only — no employer match.
FICA for self-employed (1099)
Self-employed workers pay both halves via Self-Employment Tax (SE tax) — 12.4% Social Security + 2.9% Medicare = 15.3% total on net earnings. They get a tax deduction for the employer-equivalent portion when filing.
This is why W-2 employees often net more than 1099 contractors at the same gross — the employer share is "hidden" but still costs the employer money.
What FICA pays for
- Social Security retirement: monthly benefits starting at age 62 (reduced) or 67 (full)
- Social Security disability: SSDI for workers who become disabled
- Survivor benefits: for spouses and dependents of deceased workers
- Medicare Part A: hospital coverage for people 65+
Related terms
FLSA →1099 vs W-2 →W-4 Form →I-9 →
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Is FICA the same as Social Security?
FICA is the umbrella tax that funds Social Security AND Medicare. Social Security is just one part of FICA. So "FICA" includes 6.2% Social Security + 1.45% Medicare.
Can I opt out of FICA?
No. FICA is mandatory for nearly all US workers. Limited exemptions exist for certain religious groups (Amish, Mennonite), some students working at their school, and certain non-resident aliens on specific visas (F-1, J-1).
Why is there a Social Security wage cap but not Medicare?
Social Security retirement benefits are capped, so contributions are capped too (the SS wage base, currently ~$176K). Medicare benefits are uncapped (anyone over 65 qualifies for the same care), so contributions have no cap. The Additional Medicare Tax (0.9% over $200K/$250K) is a partial solution to underfund concerns.
Do employers pay FICA on tips?
Yes. Tips are wages and subject to both employee FICA withholding and employer FICA match. Employers can claim a FICA Tip Credit (Section 45B) for the portion of tips above minimum wage they paid FICA on — useful for restaurants.
How does MyCo handle FICA?
MyCo automatically calculates and withholds employee FICA, calculates the employer match, applies the Social Security wage base cap once an employee crosses it during the year, and applies the Additional Medicare Tax when wages exceed $200K. All filed quarterly with the IRS via Form 941.