FICA (Federal Insurance Contributions Act)
Also known as: Payroll tax, Social Security and Medicare tax
The combined Social Security (6.2%) and Medicare (1.45%) tax withheld from W-2 wages by employers, matched by an equivalent employer contribution. For 1099 self-employed income, the same tax appears as 15.3% self-employment tax on Schedule SE.
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FICA is the statutory name for the federal payroll tax that funds Social Security retirement benefits and Medicare hospital insurance. The structure is dual-paid: employees see 6.2% Social Security and 1.45% Medicare withheld from each paycheck (total 7.65%) shown as 'Fed OASDI/EE' and 'Fed Med/EE' on US pay stubs. Employers separately pay the matching 7.65% from their own funds, never appearing on the employee's pay stub but constituting real cost to the employer per dollar of wage. Total FICA borne per dollar of W-2 wage is therefore 15.3% split between employee and employer.
The Social Security portion (6.2%) applies only to wages up to the annual Social Security wage base, indexed for inflation each year by the Social Security Administration and announced in October for the following calendar year. Wages above the wage base owe zero Social Security tax — only the Medicare portion (1.45%) continues to apply, with no upper limit. The Additional Medicare Tax of 0.9% layered on top by the Affordable Care Act applies to earned income above $200,000 single, $250,000 married filing jointly, and $125,000 married filing separately. Unlike base FICA, the 0.9% Additional Medicare Tax has no employer match — the employee pays the full 0.9% alone above the threshold.
For self-employed individuals, the entire 15.3% burden lands on the worker because there is no separate employer to pay the other half. This is computed and paid via Schedule SE of Form 1040 as self-employment tax. The Schedule SE arithmetic mirrors the FICA structure: net self-employment income is multiplied by 92.35% before the 15.3% rate is applied (the 92.35% adjustment is the implicit deduction for the employer-side portion). A portion of the self-employment tax paid (typically half) is then deductible above the line on Schedule 1, reducing AGI.
FICA-funded benefits are distinct from federal income tax. FICA dollars credit your Social Security earnings record (which determines your future Social Security retirement benefit) and Medicare eligibility. A worker with low federal income tax liability but high W-2 wages still pays substantial FICA and accrues full Social Security credit, which is one structural reason FICA is not refundable the way certain income tax credits are. Filing status, exemptions, and dependents do not affect FICA withholding — it is a flat percentage applied to wages.
- FICA payroll taxes: the 7.65% on every US paycheck, explained FICA breaks down to 6.2% Social Security up to the wage base, 1.45% Medicare with no cap, plus a 0.9% surtax over $200k. What each line on your stub means.
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- Schedule SE (Self-Employment Tax) The IRS form that computes self-employment tax — the self-employed equivalent of FICA — at a combined 15.3% on net earnings from self-employment, half of which is deductible above the line.
- AGI (Adjusted Gross Income) AGI is your total gross income for the tax year minus a specific set of statutory adjustments listed on Schedule 1 of Form 1040. It is the figure on which most tax calculations and eligibility tests downstream actually operate — not your gross income, not your taxable income.
- Additional Medicare Tax A 0.9% federal surtax on wages, self-employment income, and railroad retirement compensation above filing-status thresholds ($200,000 single / $250,000 MFJ / $125,000 MFS). Enacted by the Affordable Care Act in 2010. Thresholds are not indexed for inflation.
- OASDI wage base (Social Security wage base) The maximum amount of wages subject to the 6.2% Social Security (OASDI) payroll tax each calendar year. $184,500 in 2026 (up from $176,100 in 2025), adjusted annually by the Social Security Administration based on national average wage growth. The Medicare portion of FICA has no wage base.
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