What Is the FICA-HI Tax?

by Cam Merritt
FICA-HI taxes pay for Medicare benefits.

Commonly seen on paycheck stubs, the notation "FICA-HI" refers to money withheld from wages to pay for Medicare, the government-run health insurance program for Americans age 65 and older, as well as for younger people unable to work because of a disability. Both employees and their employers pay FICA-HI taxes.

What It Stands For

"FICA" stands for the Federal Insurance Contributions Act, the law that imposes a payroll tax to fund Social Security and Medicare benefits. "HI" stands for Hospital Insurance, which is the "official" name for Medicare in the U.S. Code. Where you see FICA-HI, you'll typically also see "FICA-OASDI." That stands for Old-Age, Survivors and Disability Insurance -- better known as Social Security.

Tax Rate

As of 2012, the FICA-HI tax rate was 1.45 percent of your wages. So for each $10,000 you made, you'd pay $145 in Medicare taxes. The Medicare tax is levied on all employee wages, with no upper limit, so whether your salary is $10,000, $100,000 or $1 million, you'll pay 1.45 percent of your wages in FICA-HI taxes. That's different from the Social Security tax, which is imposed only up to a certain income level; as of 2012, for example, employees paid Social Security tax only on income up to $110,100. Note that FICA taxes are assessed only on earned income from work -- primarily wages, salaries and tips. You don't pay FICA taxes on other forms of income, such as interest or capital gains.

Employer's Share

FICA payroll taxes get paid by both employees and their employers. You pay 1.45 percent of your wages in Medicare taxes, and your employer kicks in an additional 1.45 percent, so that the taxes paid on your behalf total 2.9 percent of your wages. Self-employed people are responsible for paying both halves of FICA payroll taxes, so for Medicare they must pay the whole 2.9 percent themselves.

Paying the Tax

Employees shouldn't have to worry about making sure their FICA taxes get paid. Employers are solely responsible for withholding payroll taxes from their workers' wages and for sending the money to the government. Self-employed people, however, must take care of these taxes themselves. They do so by paying estimated taxes four times a year and then, when they file their annual tax returns, squaring up with the government by paying any remaining tax due or claiming a refund for any overpayment.

About the Author

Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens"publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.

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