FICA (Federal Insurance Contributions Act)
FICA is the federal payroll tax that funds Social Security and Medicare. Employees pay 6.2 percent for Social Security plus 1.45 percent for Medicare. It is withheld from every paycheck and matched by the employer.
FICA is the line on your pay stub that funds the two big federal benefit programs. It has two parts: Social Security tax at 6.2 percent and Medicare tax at 1.45 percent of wages, for a combined 7.65 percent withheld from employee pay. Your employer pays the same amount again on your behalf, so 15.3 percent in total flows into the programs for each worker. The self-employed pay both halves themselves.
FICA is separate from federal income tax. Income tax uses brackets and is reduced by the standard deduction and pre-tax contributions, while FICA is a flat percentage of wages with no deduction. One important wrinkle: a traditional 401(k) contribution lowers your income tax but not your FICA, because Social Security and Medicare are charged on your full wages. Our paycheck playbook breaks down exactly how FICA and income tax combine to set your take-home pay.
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Related terms: Social Security Tax (OASDI) , Medicare Tax , Social Security Wage Base
Last updated . Part of the FinExplained finance glossary .