FICA Payroll Taxes: Social Security and Medicare
What Is FICA?
FICA stands for the Federal Insurance Contributions Act. FICA taxes fund two critical federal programs:
- Social Security (OASDI) — provides retirement, disability, and survivor benefits
- Medicare — provides health insurance for people 65+ and those with certain disabilities
For W-2 employees, FICA taxes are automatically withheld from every paycheck. You can see the deductions labeled as "Social Security" and "Medicare" on your pay stub.
2025 FICA Tax Rates
| Tax | Employee Share | Employer Share | Total |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | 12.4% |
| Medicare (HI) | 1.45% | 1.45% | 2.9% |
| Total FICA | 7.65% | 7.65% | 15.3% |
2025 Social Security Wage Base
The Social Security tax applies only up to a certain income limit — the "wage base." For 2025, this limit is $176,100.
- Wages above $176,100 are NOT subject to the 6.2% Social Security tax
- However, Medicare tax has NO income cap — it applies to all wages
- High earners (above $200,000 single / $250,000 MFJ) also pay an Additional Medicare Tax of 0.9%
Additional Medicare Tax
- An extra 0.9% Medicare tax on wages and self-employment income exceeding:
- $200,000 for single filers
- $250,000 for married filing jointly
- $125,000 for married filing separately
- Paid only by the employee — employers do NOT match this amount
- Reported on Form 8959 when filing your return
Self-Employment Tax (SECA)
Self-employed workers don't have an employer to share FICA costs. They pay the full equivalent as Self-Employment Tax:
- Rate: 15.3% of net self-employment earnings (12.4% Social Security + 2.9% Medicare)
- Social Security portion applies only up to $176,100 in 2025
- Calculate using Schedule SE, attached to your Form 1040
Deduction Benefit for Self-Employed Workers
To partially offset the double burden of paying both sides, self-employed workers can:
- Deduct 50% of the self-employment tax from gross income as an above-the-line deduction
- This deduction reduces your AGI and therefore your income tax, but not the self-employment tax itself
Example: Freelancer with $80,000 Net Income
Self-employment tax: $80,000 × 92.35% (net earnings rate) × 15.3% = approximately $11,304
Deductible amount: $11,304 ÷ 2 = $5,652 reduces your AGI
What FICA Taxes Fund
- Social Security retirement benefits — your work history and contributions determine your future benefit
- Social Security Disability Insurance (SSDI) — for workers who become disabled before retirement age
- Survivor benefits — for spouses and children of deceased workers
- Medicare Part A — hospital insurance for people 65+ and certain disabled individuals
The more FICA taxes you pay over your working lifetime, the higher your eventual Social Security benefit will be.