FICA (Federal Insurance Contributions Act)
Tax Glossary Term
Definition
FICA is the payroll tax that funds Social Security and Medicare. If you receive a W-2 paycheck, you and your employer each pay 7.6% (split into 6.2% for Social Security and 1.5% for Medicare) for a combined 15.3%. The Social Security portion only applies to wages up to the annual wage base ($184,500 in 2026); every dollar above that is exempt from the 6.2% SS tax. The Medicare portion has no cap, applying to all wages, and high earners face an Additional Medicare Tax of 0.9% on wages exceeding $200,000 (single) or $250,000 (married filing jointly). FICA taxes are withheld automatically from each paycheck and matched dollar-for-dollar by your employer. Self-employed individuals pay both halves through self-employment tax (15.3%), but they can deduct the employer-equivalent half as an above-the-line deduction. FICA taxes are separate from federal income tax; they fund specific trust funds rather than general revenue. Your Social Security benefit at retirement is calculated from your 35 highest-earning years of FICA-taxed wages, so these contributions directly affect your future benefits. Unlike income tax, FICA offers no brackets, no standard deduction, and no personal exemption. It applies from the first dollar of wages.
Example
Annual wages: $60,000
Social Security: $60,000 x 6.2% = $3,720
Medicare: $60,000 x 1.5% = $870
Total FICA: $4,590 (7.6%)