FICA on your paycheck refers to the Federal Insurance Contributions Act tax, which is a U.S. federal payroll tax deducted from your earnings to fund Social Security and Medicare programs
What FICA Includes:
- Social Security tax: 6.2% of your gross wages, up to a wage base limit ($176,100 in 2025)
- Medicare tax: 1.45% of your gross wages, with no wage limit
- Additional Medicare tax: 0.9% on wages above certain thresholds ($200,000 for single filers)
How It Works:
- The total FICA tax rate is 15.3%, but this is split evenly between you and your employer - you pay 7.65% (6.2% Social Security + 1.45% Medicare), and your employer matches that amount
- If you are self-employed, you pay the full 15.3% yourself but can deduct half of it on your tax return
- FICA taxes are mandatory and withheld from earned income such as salary, wages, bonuses, tips, commissions, and taxable fringe benefits. Unearned income like investments is not subject to FICA
Purpose of FICA:
- The money collected funds Social Security benefits for retirees, disabled individuals, survivors, and Medicare health coverage for eligible individuals
- Your Social Security number tracks your contributions, which earn you credits toward future Social Security and Medicare benefits
In summary, the FICA deduction on your paycheck is the mandatory payroll tax that funds Social Security and Medicare, deducted at 7.65% from your wages, with your employer contributing an equal amount
