What Is FICA Tax? Social Security & Medicare Explained

FICA stands for the Federal Insurance Contributions Act. It's the law that requires employers and employees to each pay into Social Security and Medicare — the two largest federal safety-net programs in the United States.

Unlike federal income tax, which varies based on your income, filing status, and deductions, FICA taxes are a fixed percentage of your wages. They appear on your pay stub as separate line items — typically labeled "Social Security" or "OASDI," and "Medicare" or "Med."

For 2026, FICA consists of two parts:

• Social Security Tax: 6.2% on wages up to $176,100
• Medicare Tax: 1.45% on all wages (no cap)

Your employer matches these contributions dollar-for-dollar — meaning the true cost of FICA to fund your benefits is 12.4% + 2.9% = 15.3% of your wages, split evenly between you and your employer.

Social Security tax (6.2%) only applies to wages up to a certain ceiling — the Social Security wage base, which is adjusted for inflation each year.

2026 Social Security Wage Base: $176,100

This means:

• If you earn $60,000, you pay 6.2% on all $60,000 = $3,720
• If you earn $200,000, you pay 6.2% on only $176,100 = $10,918 (not on the full $200,000)

Historical wage bases: $147,000 (2022) → $160,200 (2023) → $168,600 (2024) → $176,100 (2026). The cap rises roughly 5–8% per year in line with average wage growth.

Once you hit the wage base mid-year, Social Security withholding stops. High earners often notice a larger paycheck in the second half of the year as a result.

The Affordable Care Act introduced an Additional Medicare Tax of 0.9% on wages above certain thresholds. Unlike regular Medicare, this extra tax is only paid by the employee — employers do not match it.

2026 Additional Medicare Tax Thresholds:

• Single filers: 0.9% on wages over $200,000
• Married filing jointly: 0.9% on wages over $250,000
• Married filing separately: 0.9% on wages over $125,000

Example: Single filer earning $250,000:

• Regular Medicare: 1.45% × $250,000 = $3,625
• Additional Medicare: 0.9% × ($250,000 − $200,000) = $450
• Total Medicare: $4,075

Your employer withholds the additional Medicare tax starting when your wages from that employer exceed $200,000 during the year. If you have multiple jobs or your spouse also works, you may owe additional tax when you file your return.

If you are self-employed, you are both the employer and the employee — which means you pay the full 15.3% self-employment (SE) tax instead of the 7.65% that regular employees pay.

2026 Self-Employment Tax:

• 12.4% Social Security (on net earnings up to $176,100)
• 2.9% Medicare (on all net earnings)
• = 15.3% total SE tax on net self-employment income

However, there is a tax break: self-employed individuals can deduct half of their SE tax from their gross income when calculating federal income tax. This is the IRS's way of acknowledging that employees get a similar benefit (their employer's matching share is not counted as the employee's income).

Use our self-employment tax calculator to estimate your SE tax liability and federal income tax for 2026.

FICA taxes fund two specific federal programs — not the general budget:

Social Security (OASDI): Funds retirement benefits, disability insurance (SSDI), and survivor benefits for spouses and children of deceased workers. The amount you receive in retirement is based on your 35 highest-earning years. You need at least 40 work credits (roughly 10 years of work) to qualify for retirement benefits.

Medicare: Funds health insurance for Americans 65 and older and certain disabled individuals under 65. Medicare Part A (hospital insurance) is largely funded by your FICA Medicare contributions. Part B (medical insurance) and Part D (prescriptions) require separate premium payments in retirement.

Bottom line on the value: FICA taxes are a forced savings program tied to specific benefits. For most Americans, particularly those who live to average life expectancy, Social Security and Medicare provide positive returns on their lifetime contributions — especially for lower and middle earners.