FICA Explained: Where the 7.65% on Your Paycheck Actually Goes

The line labelled FICA on your pay stub is not one tax. It is two payroll taxes bundled together, and one of them quietly stops being charged the moment your year-to-date earnings cross a fixed ceiling.

FICA stands for the Federal Insurance Contributions Act, codified in 1954, and it funds the two largest social insurance programmes in the United States: Social Security and Medicare. Unlike federal income tax, FICA is essentially flat, and there is no standard deduction to soften it.

The two taxes inside FICA

Component	Your rate	Wage base	Maximum you pay
Social Security (OASDI)	6.2%	$176,100 (2025)	$10,918.20
Medicare (HI)	1.45%	No cap	No maximum
Additional Medicare	0.9%	Over $200,000 single / $250,000 joint	Varies with income

The Social Security wage base is indexed to average wages and rises most years, so a high earner’s FICA bill changes even when the headline rates do not. The 0.9% Additional Medicare tax has no employer match — only the employee pays it.

Your employer pays the same amount again

For every 7.65% withheld from you, the employer contributes an identical 7.65%, making the true combined rate 15.3% of covered wages. That is why employers sometimes mention the “fully loaded” cost of a salary: a $60,000 position costs the company roughly $4,590 more per year in payroll tax than the salary alone suggests.

Worked example: a $60,000 salary

• Social Security: $60,000 × 6.2% = $3,720
• Medicare: $60,000 × 1.45% = $870
• Total FICA withheld: $4,590
• Employer matches: another $4,590

At a $200,000 salary the Social Security portion caps out at $10,918.20, but Medicare keeps applying to every dollar, and earnings above $200,000 pick up the extra 0.9%.

Why FICA disappeared from your last paycheck

Once year-to-date wages exceed the Social Security wage base, the 6.2% line drops to zero for the rest of the year — your take-home pay jumps. If you changed jobs mid-year, both employers may have withheld up to the cap, in which case the excess Social Security tax is claimed back as a credit on your annual return. Medicare has no cap, so that portion is never refunded.

Check your own numbers

To see how FICA stacks up against income tax and other deductions on your own salary, run the numbers through our paycheck calculator, and if you have already crossed the wage base, the net pay calculator shows exactly what lands in your account.

FAQ

Is FICA the same as federal income tax? No. Income tax is progressive, depends on filing status and deductions, and is often partly refunded. FICA is a flat payroll tax with no personal exemption.

Why do self-employed people pay double? They pay SECA at 15.3% (12.4% Social Security plus 2.9% Medicare), covering both the employee and employer halves — though half of that is deductible against income tax.

Can I opt out of FICA? Only in narrow cases, such as certain religious groups with approved exemptions and some state or local retirement plans that are not covered by Social Security.

Sources: Social Security Administration contribution-and-benefit-base tables; IRS Publication 15 (Employer’s Tax Guide).