The Federal Insurance Contributions Act, or FICA, is a federal government payroll tax that employees pay to fund two benefits: Social Security and Medicare. Both programs are part of our country’s social safety net, and your contributions are mandatory.
What Is the FICA Tax?
The Social Security Administration tax under FICA contributes to support for retirement, old age, disability, surviving dependents and spouses of eligible workers, according to the IRS. It’s commonly thought of as being a government-sourced retirement plan. The medical portion of FICA taxes is a separate contribution that the government uses to fund and manage the federal Medicare health insurance program. Different rates apply for these taxes.
How Much Is the FICA Tax?
The FICA tax rate for the Social Security tax is set at 6.2 percent of your gross wages. The rate for your contribution to the Medicare tax is 1.45 percent. Taken together, your total FICA contribution is 7.65 percent of your earnings. These rates have not changed in recent years.
Who Pays FICA Taxes?
FICA is a federal payroll tax on earned income that’s split between the employer and employee tax withholdings. You should see how much FICA withholding you’ve paid on your pay stub.
Self-employed taxpayers pay SECA rather than FICA taxes. SECA stands for the Self-Employed Contributions Act. Self-employed individuals must pay the full tax that is normally split between an employer and employee, unlike employees who receive a W-2.
The federal government sets the rate or deduction percentage of your gross income for your FICA taxes. These percentages are not divided equally between the two parts of this tax. Your employer always provides a statement of two separate FICA tax deductions on your pay stub or statement.
Will Federal Income Taxes Cover FICA?
FICA taxes are not the same as income taxes. They're payroll taxes, which are not the same as individual income taxes that filers may owe on their earnings. The Tax Foundation indicates that payroll taxes are taken from salaries or wages to fund the social welfare programs. Even exempt organizations must pay FICA.
Who Is Exempt From Paying the Social Security Tax?
The Social Security tax is subject to a "wage base." It's imposed up to a certain income threshold each year. The wage base was $147,000 in 2022, and it increases to $160,200 in 2023, according to the Social Security Administration.
Any income you earn over this amount will be exempt from contributions to the Social Security fund, at least until the first day of the next calendar year, when your annual income level begins accumulating again from zero. Your Medicare FICA contribution doesn't have a wage base.
Exemptions for FICA taxes are only available for certain classes of employees or when your annual gross income exceeds a maximum set by the federal government.
Payments Not Subject to FICA Taxes
If You're a Student
A student FICA exemption applies to college or university student employees who work for the institution they attend. They can be eligible for exemption from FICA taxes, according to the IRS. The main requirement is being classified as a student, whether full time or half time. This student employment exemption requires enrollment in a course of study at the university or college as your primary activity.
If You're a Nonresident Alien
Some nonresident aliens are exempt from FICA taxes. The IRS regulations also provide an exemption from FICA tax for employees of foreign governments who work in the United States. The employee must perform duties in an official capacity of the foreign government to qualify for this exemption. It doesn't apply to nonimmigrants and nonresidents who work for American companies.
The IRS includes various temporary visa categories as the basis for eligibility for this exemption. In the case of foreign nonresident students, the exemption applies to any earnings from on-campus and off-campus work if it's allowed. The exemption doesn’t apply to spouses or other family members who are accompanying international students.
If You're a Clergy Member
Certain clergy members are also eligible for exemption from FICA taxes if they submit the proper forms to the IRS.
The Additional Medicare Tax
High earners are subject to a second Medicare tax, known as the Additional Medicare Tax. This is levied at 0.9 percent against wages, salaries, self-employment income and railroad retirement compensation, according to the IRS.
As of 2022, it applies to incomes over $250,000 if you're married and file a joint tax return, dropping to just $125,000 if you're married and file a separate return. The threshold is $200,000 for all other taxpayers. Employers don't have to contribute to this tax.
Frequently Asked Questions
Is FICA Social Security?
The FICA tax includes the Social Security Administration tax that contributes to support for retirement, old age, disability, surviving dependents and spouses of eligible workers.
Is FICA Federal Tax?
FICA taxes are imposed by the federal government, and they’re covered by Sections 3101 and 3111 of the Internal Revenue Code, according to the IRS. However, they're not reported on your annual Form 1040 tax return. Form 1040 applies only to income tax.
Is FICA Tax Deductible?
FICA taxes aren’t deductible on a taxpayer's personal tax return, but employers can claim a deduction for their share of the Social Security and Medicare taxes paid on behalf of their employees.
- IRS: Topic No. 751 Social Security and Medicare Withholding Rates
- Tax Foundation: What Are Payroll Taxes and Who Pays Them?
- IRS: Student FICA Exception
- IRS: Aliens Employed in the U.S. – Social Security Taxes
- Social Security Administration: Contribution and Benefit Base
- IRS: Topic No. 560 Additional Medicare Tax
- Social Security Administration: What Is FICA?
- IRS: Section 3121 - Tips Included for Both Employee and Employer Taxes
Hashaw Elkins is a financial services and tax professional, as well as a project management consultant. She has led projects across multiple industries and sectors, ranging from the Fortune Global 500 to international nongovernmental organizations. Hashaw holds an MBA in Real Estate and an MSci in Project Management. She is further certified in organizational change management, diversity management, and cross-cultural mediation.