FICA Tax Explained: Social Security & Medicare Withholding
FICA is the one tax that nearly every worker pays regardless of their filing status, state, or deductions. Yet most people don’t fully understand how it’s calculated — or why it can be a larger burden than income tax for lower earners. Here’s how it works.
The Federal Insurance Contributions Act
FICA stands for the Federal Insurance Contributions Act — the law that authorizes the collection of payroll taxes to fund Social Security and Medicare. These are the two federal programs that provide retirement, disability, and healthcare benefits to retirees and certain other Americans.
Unlike federal income tax, which depends on your total income, filing status, deductions, and credits, FICA taxes are flat-rate taxes that apply to most types of earned income. Your employer matches your FICA contribution dollar-for-dollar — so for every $100 in FICA you pay, your employer also pays $100, for a combined $200 flowing to Social Security and Medicare.
Self-employed individuals pay both the employee and employer shares — a combined 15.3% — under the Self-Employment Tax (though they can deduct the employer half).
Social Security tax (OASDI)
The Social Security portion of FICA is officially called OASDI: Old-Age, Survivors, and Disability Insurance. In 2026, it is withheld at a flat 6.2% of your gross wages — but only up to the annual wage base. In 2026, that wage base is $184,500.
Once your wages from a single employer reach $184,500 in a calendar year, Social Security withholding stops for the rest of the year. Your paychecks effectively get larger. For someone paid bi-weekly ($184,500 ÷ 26 = $7,096/paycheck), the wage base is hit roughly in October.
The maximum employee Social Security tax in 2026 is: $184,500 × 6.2% = $11,439.
Medicare tax (HI)
The Medicare portion is officially called HI: Hospital Insurance. It is withheld at 1.45% of all wages — there is no wage base cap. Every dollar you earn is subject to Medicare tax.
Employees earning above $200,000 also pay an Additional Medicare Tax of 0.9% on wages above that threshold. However, the threshold for couples is $250,000 for married filing jointly (or $125,000 for married filing separately) — calculated on the tax return, not per employer.
Your employer is required to begin withholding the Additional Medicare Tax once your wages at that job exceed $200,000, regardless of your filing status or your spouse’s income. If you’re married and your combined income is below $250,000 but your employer withheld the additional 0.9%, you’ll get a credit when you file your return.
| Tax | Rate | Wage Limit (2026) | Max Employee Tax |
|---|---|---|---|
| Social Security | 6.2% | $184,500 | $11,439 |
| Medicare | 1.45% | No cap | No limit |
| Additional Medicare | 0.9% | Above $200K single / $250K MFJ | No limit |
What income is subject to FICA?
FICA applies to earned income — wages, salaries, bonuses, tips, and other compensation for services rendered. It does not apply to investment income (dividends, capital gains, interest), rental income, or certain types of pension or retirement distributions.
There are important distinctions in how pre-tax deductions interact with FICA:
- Traditional 401(k) contributions — reduce federal income tax, but FICA is still calculated on the full gross wage before the 401(k) is taken out.
- Health insurance premiums, HSA, FSA contributions via payroll — under Section 125 cafeteria plans, these reduce both income tax and FICA. This is an additional saving beyond the income tax benefit.
- Tips — fully subject to FICA. Employees are responsible for reporting tips to employers so FICA can be withheld.
How FICA differs from income tax
FICA and federal income tax are fundamentally different systems that happen to be collected together on your paycheck. The key differences:
| Federal Income Tax | FICA (SS + Medicare) | |
|---|---|---|
| Rate structure | Progressive (10%–37%) | Flat (7.65% total for most workers) |
| Filing status matters? | Yes — dramatically | No |
| Standard deduction applies? | Yes | No |
| Pre-tax 401(k) reduces it? | Yes | No |
| Health insurance (Section 125) reduces it? | Yes | Yes |
| Wage cap? | No | Yes — SS capped at $184,500 |
| Goes to: | General federal revenue | Social Security & Medicare trust funds |
For lower-income workers, FICA can actually exceed their federal income tax burden. A worker earning $30,000/year pays $2,295 in FICA (7.65%) — but after the standard deduction, their federal income tax is only $1,370. For these workers, FICA is their biggest federal tax bill.
See your exact FICA breakdown
Our paycheck calculator shows your Social Security and Medicare withholding separately from your income taxes. You can also see exactly how health insurance premiums or HSA contributions reduce your FICA bill — enter them in the deductions section and watch the FICA line change.