FICA (Federal Insurance Contributions Act)
Payroll taxes that fund Social Security and Medicare, totaling 7.65% of wages for employees (matched by employers).
What You Need to Know
FICA taxes are the mandatory payroll deductions that fund Social Security and Medicare. Every paycheck, you see these two lines eating into your gross pay—but they're funding your future retirement and healthcare benefits.
FICA = Social Security + Medicare
Social Security Tax (6.2%)
- Employee pays: 6.2% of wages
- Employer matches: 6.2% (total 12.4%)
- Wage base limit (2025): $176,100
- Above $176,100: No more SS tax!
Medicare Tax (1.45%)
- Employee pays: 1.45% of wages
- Employer matches: 1.45% (total 2.9%)
- No wage limit (taxed on all earnings)
Additional Medicare Tax (0.9%)
- Kicks in above $200,000 (single) or $250,000 (married)
- Employee only (no employer match)
- Total Medicare tax above threshold: 2.35%
Real Paycheck Examples:
$60,000 salary:
- Social Security: $60,000 × 6.2% = $3,720/year ($310/month)
- Medicare: $60,000 × 1.45% = $870/year ($72.50/month)
- Total FICA: $4,590/year (7.65%)
$180,000 salary:
- Social Security: $176,100 × 6.2% = $10,918.20 (maxed out!)
- Medicare: $180,000 × 1.45% = $2,610
- Total FICA: $13,528.20/year
Self-Employment Tax:
Self-employed? You pay BOTH sides (employer + employee):
- Social Security: 12.4%
- Medicare: 2.9%
- Total: 15.3% on net earnings
The Bottom Line: FICA takes 7.65% of your paycheck, but it's not wasted—it's pre-funding your retirement income and healthcare. Understanding the wage cap helps you plan compensation and bonuses strategically.
Sources & References
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Related Terms in Career & Income
AGI (Adjusted Gross Income)
Your total gross income minus specific deductions, used to determine tax liability and eligibility for credits.
After-Tax Income
Your take-home pay after federal, state, and payroll taxes are deducted—the actual money you can spend.
Gross Income
Your total income before any taxes or deductions are taken out—the starting point for tax calculations.
Marginal Tax Rate
The tax rate applied to your last dollar of income—the rate you pay on additional earnings.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all taxpayers who don't itemize.
Tax Bracket
The range of income taxed at a specific rate under the U.S. progressive tax system.