FICA Tax: Definition and How It Works in 2024-2025
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Whether you work for an employer or are self-employed, you're required to give the government a share of your earnings. In the U.S., employers withhold taxes from each paycheck for Social Security and Medicare, which are collectively referred to as FICA taxes.
What is FICA tax?
FICA is a payroll tax, and it's short for the Federal Insurance Contributions Act. The law requires employers to withhold a certain percentage of an employee’s wages to help fund Social Security and Medicare. The total bill is split between the employer and the employee.
How FICA tax works
FICA taxes are a combination of Social Security and Medicare taxes that equal 15.3% of your earnings. If you work for an employer, you are responsible for half of the total bill (7.65%), which includes a 6.2% Social Security tax and 1.45% Medicare tax on your earnings.
On your paycheck, the Social Security portion of FICA is sometimes labeled as “OASDI tax,” which is short for “old-age, survivors, and disability insurance” tax. Your Social Security number is used to record how much you've paid.
If you're self-employed, you are responsible for paying the full 15.3% FICA tax. Because you may not be receiving a traditional paycheck, you may need to file estimated quarterly taxes in lieu of withholdings. The good news? You can usually deduct half of what you pay in self-employment taxes when you file your tax return.
FICA tax rates for 2024 and 2025
In 2024, only the first $168,600 of your earnings are subject to the Social Security tax. In 2025, this will rise to $176,100.
There is an additional 0.9% surtax on top of the standard 1.45% Medicare tax for those who earn over $200,000 (single filers), $250,000 (joint filers) or $125,000 (married filing separately). This will remain the same for both 2024 and 2025.
Employee pays | Employer pays | |
|---|---|---|
Social Security tax (aka OASDI) | 6.2% Only on the first $168,600 in 2024 and the first $176,100 in 2025. | 6.2% Only on the first $168,600 in 2024 and the first $176,100 in 2025. |
Medicare tax | 1.45%. | 1.45%. |
Total | 7.65%. | 7.65%. |
Additional Medicare tax | 0.9% Only on earnings over $200,000 for single filers; $250,000 for joint filers; and $125,000 for those married filing separately. |
What is withholding tax?
A withholding tax is an income tax that a payer (typically an employer) remits on a payee's behalf (typically an employee). The payer withholds the tax from the payee's income. FICA tax is a type of withholding tax.
Other payroll tax items you may hear about
FUTA tax: This stands for Federal Unemployment Tax Act. The tax funds a federal program that provides unemployment benefits to people who lose their jobs. Employees do not pay this tax or have it withheld from their pay. Employers pay it.
SUTA tax: The same general idea as FUTA, but the money funds a state program. Employers pay the tax.
Why do I have to pay FICA tax?
Employers have to withhold taxes — including FICA taxes — from employee paychecks because taxes are a pay-as-you-go arrangement in the United States. When you earn money, the IRS wants its cut as soon as possible.
Some people are “exempt workers,” which means they elect not to have federal income tax withheld from their paychecks. Social Security and Medicare taxes will still come out of their checks, though.
Typically, you become exempt from withholding only if two things are true:
You got a refund of all your federal income tax withheld last year because you had no tax liability.
You expect the same thing to happen this year.
» MORE: How to fill out a W-4 form
