Federal Insurance Contributions Act (FICA)

Key points

• FICA is the federal payroll tax system that funds Social Security and Medicare.
• In 2024, Social Security tax is 6.2% for employees (6.2% employer), applied to wages up to $168,600.
• Medicare tax is 1.45% for employees (1.45% employer) on all wages, plus an additional 0.9% on wages above certain thresholds. Employers do not match the additional 0.9%.
• Self-employed people pay both shares under SECA (total 15.3%) but may deduct half the employer-equivalent portion.
• Supplemental Security Income (SSI) is funded from general revenue, not FICA.
• The Social Security Trust Fund faces projected shortfalls; policymakers are considering changes such as raising the retirement age, cutting high-earner benefits, or increasing payroll taxes.

What FICA is and why it exists

The Federal Insurance Contributions Act (FICA), enacted in 1935, requires payroll contributions from workers and employers to finance Social Security (retirement, disability, survivors) and, since 1965, Medicare (hospital insurance). The tax is mandatory and collected through payroll withholding.

2024 rates and rules

• Social Security: 12.4% total (6.2% employee + 6.2% employer) on earnings up to the wage base of $168,600 (2024). Earnings above that are not subject to Social Security tax.
• Medicare: 2.9% total (1.45% employee + 1.45% employer) on all earnings.
• Additional Medicare tax: an extra 0.9% applies to employee wages above $200,000 (single filers) and $250,000 (married filing jointly). Employers do not match this additional tax.
• Self-employed (SECA): pay both employee and employer shares (12.4% + 2.9% = 15.3%) on net self-employment income; half of the self-employment tax can be deducted as an adjustment to income.

How FICA affects your paycheck (examples)

Example 1 — $50,000 annual wages (employee portion, 2024):
* Social Security: $50,000 × 6.2% = $3,100
Medicare: $50,000 × 1.45% = $725
Total FICA withheld = $3,825

Example 2 — $250,000 annual wages, single filer (employee portion, 2024):
* Social Security: $168,600 × 6.2% = $10,453.20 (wage cap reached)
Medicare: $250,000 × 1.45% = $3,625
Additional Medicare: ($250,000 − $200,000) × 0.9% = $450
* Total FICA withheld = $10,453.20 + $3,625 + $450 = $14,528.20

Employers withhold and remit the employee share and pay their matching share (except for the additional 0.9% Medicare tax).

Special considerations and outlook

• SSI is separate: Supplemental Security Income is funded from general tax revenues, not FICA.
• Long-term funding: Projections indicate the Social Security Trust Fund may be depleted within the next decade without changes to revenue or benefits. Potential policy responses include raising payroll tax rates, increasing the retirement age, or reducing benefits for some recipients.

Frequently asked questions

Q: Do I have to pay FICA?
A: Yes. Most wage earners have FICA taxes withheld from paychecks; self-employed individuals pay via SECA.

Q: Is Social Security the same as FICA?
A: No. FICA is the law that requires payroll taxes; Social Security is one of the programs funded by those taxes (along with Medicare).

Q: Who pays the additional Medicare tax?
A: Employees (and self-employed individuals) pay the extra 0.9% on income above the statutory thresholds. Employers do not match it.

Bottom line

FICA is the payroll tax framework that funds the U.S. Social Security and Medicare systems. Employees and employers share most payroll tax obligations, while self-employed workers cover both shares but receive a partial deduction. Understanding current rates, wage limits, and the projected funding challenges for Social Security can help individuals plan for retirement and evaluate potential policy changes.