What Is FICA Tax? The 7.65% on Every Paycheck
The two components
| Component | You pay | Employer pays | Combined | Applies to |
|---|---|---|---|---|
| Social Security (OASDI) | 6.20% | 6.20% | 12.4% | Wages up to an annual cap |
| Medicare (HI) | 1.45% | 1.45% | 2.9% | All wages, no cap |
| FICA total | 7.65% | 7.65% | 15.3% |
FICA stands for the Federal Insurance Contributions Act, the law that funds Social Security and Medicare through payroll. On a stub it may appear under those two names rather than as "FICA", and some employers label them OASDI and Medicare or Med.
Your employer pays the same again
For every dollar taken from your check, your employer sends a matching dollar. The combined 15.3% is the real cost of the programme, and economists generally treat the employer half as compensation that would otherwise have reached you as wages.
That matters most when you go self-employed. There is no employer to split with, so the self-employment tax charges the full 15.3% — on roughly 92.35% of net self-employment earnings, with half of the resulting tax deductible on the return. That single change is the biggest reason contract rates need to exceed employee hourly rates.
Social Security stops; Medicare does not
Social Security tax applies only up to an annual wage base that is adjusted every year for wage growth. Earn past it and the 6.2% line disappears from your stub for the rest of the calendar year, and your take-home jumps noticeably. It resets every January.
Medicare has no ceiling — the 1.45% applies to every dollar of wages. At higher incomes an Additional Medicare Tax is charged on the employee side above a threshold that is not indexed for inflation and is not matched by the employer.
Both the wage base and that threshold are figures that change or that depend on filing status, which is why this site's take-home calculator lets you type the FICA percentage rather than baking in numbers that would go stale each January. Look the current figures up at the Social Security Administration or the IRS when precision matters.
What FICA is charged on
- Charged on gross wages, including overtime, bonuses and commissions.
- Not reduced by traditional 401(k) or 403(b) contributions — those defer income tax only.
- Reduced by most Section 125 cafeteria plan elections: workplace health premiums, FSA and payroll-deducted HSA contributions usually escape both income tax and FICA.
- Not charged on genuine expense reimbursements under an accountable plan.
It is not really a tax you get nothing for
Unlike income tax, FICA buys a specific and traceable entitlement. Social Security benefits are computed from your 35 highest-earning indexed years, and you need 40 credits — about ten years of work — to qualify for a retirement benefit at all. Medicare eligibility works on a similar credit basis. Your earnings record is visible in a Social Security account, and it is worth checking occasionally: a missing year of earnings is much easier to correct while the paperwork still exists.
A planning estimate of what each paycheck deposits, built from rates you supply — your effective federal and state rates from last year’s return, not a baked-in tax table that goes stale every January.
Frequently asked questions
How much is FICA tax?
7.65% of gross wages for the employee: 6.2% Social Security plus 1.45% Medicare. The employer pays the same again, so the combined rate is 15.3%.
Why did FICA stop coming out of my paycheck?
The Social Security portion applies only up to an annual wage base. Once your year-to-date wages pass it, that 6.2% stops until January. Medicare keeps being charged because it has no cap.
Do self-employed people pay more FICA?
They pay both halves as self-employment tax, 15.3% of roughly 92.35% of net earnings, and can deduct half of it on their return. An employee splits the same cost with an employer.
Can I avoid FICA with a 401(k)?
No. Traditional retirement contributions defer income tax but not Social Security and Medicare. Cafeteria plan benefits such as health premiums and FSA elections typically do avoid FICA.
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