What Is FICA?
FICA stands for the Federal Insurance Contributions Act. It is the federal law that requires employers to withhold Social Security and Medicare taxes from every paycheck. If you have ever looked at a pay stub and seen line items for "OASDI" and "Medicare," those are the two components of FICA.
Unlike federal income tax — which is progressive and depends on your deductions and bracket — FICA is a flat percentage on earned income, up to a cap on the Social Security side. Most employees pay 7.65% of each paycheck toward FICA, and the employer pays a matching 7.65%.
Social Security Tax (OASDI)
The Social Security portion of FICA is 6.2% of wages, withheld from each paycheck up to an annual wage base limit. In 2026, the Social Security wage base is $184,500 (source: SSA fact sheet). Wages above that amount are not subject to the 6.2% Social Security tax.
| Component | Employee Rate | Employer Rate | Wage Base (2026) |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | $184,500 |
| Medicare (HI) | 1.45% | 1.45% | No cap |
| Total FICA | 7.65% | 7.65% | — |
What "wage base" means. Only the first $184,500 in 2026 wages is subject to the 6.2% Social Security tax. Once your year-to-date earnings cross that threshold, Social Security withholding stops for the rest of the year. Medicare withholding continues regardless of how much you earn.
Medicare Tax
The Medicare portion of FICA is 1.45% of all wages, with no upper limit. Unlike Social Security, there is no wage base — every dollar you earn is subject to Medicare tax.
Employers also pay 1.45% on all wages for each employee. Combined, the employer and employee each pay 7.65% (6.2% + 1.45%) on wages up to the Social Security cap.
Additional Medicare Tax
Higher earners also pay an Additional Medicare Tax of 0.9% on wages above certain thresholds. This additional amount is paid by the employee only — the employer does not match it.
| Filing Status | Threshold | Additional Rate |
|---|---|---|
| Single | $200,000 | 0.9% |
| Married Filing Jointly | $250,000 | 0.9% |
| Married Filing Separately | $125,000 | 0.9% |
A single earner making $230,000 in wages pays the standard 1.45% Medicare on the full amount, plus 0.9% on the $30,000 above $200,000. The effective Medicare rate on the total is higher than 1.45% but lower than the 2.35% that applies only to the portion above the threshold.
Self-Employment Tax: When You Pay Both Sides
Self-employed workers — freelancers, independent contractors, sole proprietors — do not have an employer to match FICA. Instead, they pay the entire 15.3% themselves through the self-employment tax.
However, two adjustments reduce the effective burden:
- 92.35% rule: Self-employment tax is calculated on 92.35% of net self-employment income, not 100%. This roughly accounts for the employer-equivalent portion that would not be subject to tax if an employer were paying it.
- Deduction for employer half: Self-employed taxpayers can deduct the employer-equivalent portion (7.65%) of self-employment tax as an above-the-line deduction on Form 1040, reducing adjusted gross income.
The result: while the nominal self-employment tax rate is 15.3%, the effective rate on net earnings is closer to 14.1% after the 92.35% adjustment, and the AGI deduction provides additional income tax savings.
For a deeper explanation of self-employment tax rules, see Self-Employment Tax Rules.
Scenario: $85,000 W-2 Employee
A single W-2 employee earning $85,000 in 2026:
- Social Security: 6.2% × $85,000 = $5,270 (well below the $184,500 wage base)
- Medicare: 1.45% × $85,000 = $1,232.50
- Total FICA withheld: $6,502.50
- Employer matches: $6,502.50 (not shown on pay stub, but paid by the employer)
Take-home pay is reduced by the employee's $6,502.50 in FICA withholding, plus federal income tax withholding (which depends on bracket, filing status, and the standard deduction).
Scenario: $120,000 Self-Employed
A freelancer with $120,000 in net self-employment income in 2026:
- Taxable SE income: 92.35% × $120,000 = $110,820
- Social Security: 12.4% × $110,820 = $13,741.68
- Medicare: 2.9% × $110,820 = $3,213.78
- Total self-employment tax: $16,955.46
- Above-the-line deduction: Half of $16,955.46 = $8,477.73 reduces AGI
This self-employment tax is in addition to regular federal income tax on the net earnings. The combined burden is why self-employed workers often owe more in total taxes than a W-2 employee at the same gross income.
FICA vs. Federal Income Tax
FICA and federal income tax are separate withholdings that serve different purposes:
- FICA is a flat-rate payroll tax that funds Social Security and Medicare. The rate does not change based on deductions or filing status (though the Additional Medicare Tax applies above income thresholds).
- Federal income tax is progressive, based on taxable income after deductions, and varies by bracket and filing status.
On a typical pay stub, you will see both. FICA is the fixed 7.65% (plus Additional Medicare if applicable). Federal income tax withholding varies based on your W-4 elections and estimated annual income.
Where to Verify FICA Rates and Limits
The Social Security Administration announces the annual wage base each year, typically in October. The IRS publishes FICA withholding rules in Publication 15 (Employer's Tax Guide) and Publication 51 (Agricultural Employer's Tax Guide). Current rates and thresholds are available at ssa.gov and irs.gov.