Look at any U.S. pay stub and you'll see two deductions that show up no matter what: Social Security and Medicare. Together, they're called FICA taxes — short for the Federal Insurance Contributions Act, the 1935 law that created Social Security. Here's what these taxes actually fund, how much you pay, and why your boss pays the same amount alongside you.
The Two Halves of FICA
FICA has two components:
- Social Security (OASDI): 6.2% of your wages, up to an annual wage cap.
- Medicare (HI): 1.45% of all your wages, with no cap. Plus an extra 0.9% on earnings above $200,000.
Your employer matches both — they pay another 6.2% for Social Security and 1.45% for Medicare on top of what you pay. So the government actually collects 15.3% in combined FICA contributions for most wages, even though you only see half of that on your stub.
Social Security: The Wage Base Cap
Social Security tax doesn't apply to every dollar you earn. There's an annual wage base limit that increases most years with inflation. For 2025, the cap is $176,100. Once your year-to-date wages cross that line, Social Security tax stops for the rest of the year.
That's why higher earners sometimes see a sudden bump in their take-home pay around November or December — they've maxed out the Social Security tax for the year. (Medicare keeps going, though.)
| Year | SS Wage Base | Max Employee SS Tax |
|---|---|---|
| 2023 | $160,200 | $9,932 |
| 2024 | $168,600 | $10,453 |
| 2025 | $176,100 | $10,918 |
Medicare: No Cap, Plus a Surtax
Unlike Social Security, Medicare tax applies to every dollar of your wages — there's no wage base. The base rate is 1.45% for employees (matched by employers).
There's also an Additional Medicare Tax of 0.9% on wages above $200,000 for a single filer (or $250,000 married filing jointly). This one is not matched by your employer — only you pay it. Employers start withholding it automatically once your YTD wages with that employer cross $200,000, regardless of your filing status.
What FICA Actually Pays For
FICA taxes don't go into the general fund — they're earmarked for specific federal programs:
- Social Security retirement benefits — the monthly checks retirees receive starting at age 62 or later.
- Social Security disability insurance (SSDI) — benefits for workers who can no longer work due to disability.
- Survivor benefits — paid to spouses and children of deceased workers who paid into the system.
- Medicare Part A — hospital insurance for Americans 65 and older (and some younger people with disabilities).
Self-Employed? You Pay Both Halves
If you're self-employed, freelance, or a 1099 contractor, there's no employer to split FICA with you. You pay the full 15.3% yourself — known as self-employment tax. The good news: half of it is deductible against your income tax. The bad news: it still stings.
Are FICA Taxes Refundable?
Generally, no. Federal income tax can be refunded if you overpay through withholding, but FICA is not refundable. The one exception: if you worked for two employers in the same year and the combined wages exceeded the Social Security wage base, you can claim the excess Social Security tax back when you file your federal return.
How FICA Affects Your Paycheck Math
FICA is calculated on your gross pay, but after certain pre-tax deductions are removed. Specifically:
- Traditional 401(k) and HSA contributions reduce wages for federal/state income tax — but they also reduce FICA wages.
- Health insurance premiums paid through a Section 125 (cafeteria) plan reduce FICA wages.
- Roth 401(k) contributions do not reduce FICA wages — you pay FICA on the full amount.
That's a small but real reason traditional 401(k) contributions feel more painless than Roth ones — you also dodge the FICA hit on the money going in.