• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The College Investor

Student Loans, Investing, Building Wealth

  • About
  • Podcast
  • Research
  • Contact
  • Save For College
      • How To Start

      • How To Save For College
      • How To Pay For College
      • What Is the Average Cost of College?
      • What Is A 529 Plan and Where to Open One in Your State
      • How Much Should You Have In A 529 Plan By Age
      • How To Use A 529 Plan For Private Elementary And High School
      • What Are Qualified Expenses For A 529 Plan (And What Doesn’t Count)?
      • The Best Brokers To Open A 529 Plan
      • Tools + Accounts

      • 529 Plans: The Ultimate College Savings Plan
      • 529 Plan Contribution Limits
      • Prepaid Tuition Plans | What To Know
      • Understanding And Using 529A ABLE Accounts
      • Using A Roth IRA To Save And Pay For College
      • FAFSA Deadlines for Financial Aid
      • CollegeBacker Review
      • Upromise Review
      • UNest Review
      • Other Options

      • Student Loan And Financial Aid Programs By State
      • The Guide To Military And VA Education Benefits
      • How To Fill Out The FAFSA
      • How To Find College Scholarships
      • The Best College Scholarship Search Websites
      • How To Find Grants To Pay For College
      • Pell Grants: What They Are And How To Qualify
      • Understanding Federal Work-Study
      • How To Use A 529 Plan If Your Child Doesn’t Go To College
  • Student Loans
      • Borrowing

        • How Student Loans Work
        • How To Apply For A Student Loan
        • Best Student Loans And Rates In January 2023
        • 10 Best Private Student Loans Of January 2023
        • Best Student Loans To Pay For Graduate School
        • Best Student Loans To Pay For Medical School
        • Parent Loans To Pay For College
        • No-Cosigner Student Loan Options
        • Guide To Income Sharing Agreements (ISAs)
        • Best International Student Loans
      • Get Out Of Debt

        • Best Student Loan Refinance Companies In January 2023
        • Best Student Loan Repayment Plans
        • Best Student Loan Refinancing Bonuses And Promotional Offers Of January 2023
        • Student Loan Forgiveness Programs (The Complete List)
        • The Full List Of Student Loan Forgiveness Programs By State
        • Public Service Loan Forgiveness (PSLF)
        • Top Student Loan Scams
        • Average Student Loan Monthly Payment
        • Average Student Loan Debt By Year
      • Reviews

        • Credible Review
        • Splash Review
        • Ascent Review
        • Citizens Bank Review
        • Commonbond Review
        • Earnest Review
        • ELFI Review
        • Laurel Road Review
        • LendKey Review
        • SoFi Review
  • Investing
      • How To Start

        • How To Start Investing in High School
        • How To Start Investing In College
        • How To Start Investing In Your Twenties For 22 – 29 Year Olds
        • How To Start Investing In Your 30s For 30 – 39 Year Olds
        • How To Start Investing With $100 Or Less
        • How To Give Kids The Gift Of Stock
        • What Is Dividend Growth Investing
        • IRA Rollover Chart
      • Tools + Accounts

        • Best Online Stock Brokers
        • The Best Traditional And Roth IRA Accounts
        • The Best Robo-Advisors
        • The Best Investing Apps
        • The Best Places to Trade Options
        • The Best Places To Open A Health Savings Account
        • The Best Solo 401k Providers
        • The Best Self-Directed IRA Providers Of 2023
        • Best Cryptocurrency Exchanges
      • Reviews

        • Vanguard Review
        • Fidelity Review 2023
        • M1 Finance Review
        • TD Ameritrade Review 2023
        • Charles Schwab Review
        • Robinhood Review
        • Webull Review
        • Betterment Review 2023
        • Wealthfront Review
  • Earn More Money
      • Extra Income

        • 20 Best Side Hustles You Can Start Earning With In 2023
        • 53 Side Hustle Ideas To Make Money Fast
        • 100 Ways To Make Money In College
        • 80 Ways To Make Money From Home In 2023
        • 5 Quick Money Making Ideas (That Take Less Than 1 Hour)
        • 10 Interesting Ways You Can Make Money Driving
        • High-Paying Side Gigs That Earn $1,000 or More Per Month
        • The 10 Best Money-Making Apps
        • Paid Surveys: Earn Money For Giving Your Opinion Online
        • 10 Crazy Ways To Make $10,000 You’ve Never Heard Of
      • Build Wealth

        • 40 Passive Income Ideas You Can Use To Build Wealth In 2023
        • 3 Ways To Make $50,000 Per Year Without Working With Passive Income
        • How To Become A Real Estate Investor With Just $500
        • 15 Best Online Business Ideas
        • Residual Income: 7 Super Smart Ways to Build It
        • The Most Common Multiple Income Streams
        • How To Become A Real Estate Mogul With Only $10,000
      • Reviews

        • Fundrise Review
        • RealtyMogul Review
        • FarmTogether Review
        • AcreTrader Review
        • Swagbucks Review
        • Survey Junkie Review
        • TopCashback Review
        • DoorDash Review
  • Personal Finance
      • Banking

        • 10 Best High Yield Savings Accounts Of January 2023
        • 10 Best Money Market Accounts Of January 2023
        • 10 Best Free Checking Accounts In January 2023
        • Best Bank CD Rates Of January 2023
        • 10 Best Business Checking Accounts In January 2023
        • Best Online Banks Of January 2023
        • Best Credit Unions Nationwide Of January 2023
        • Best College Student Checking Accounts Of January 2023
      • Insurance

        • Best Life Insurance Companies
        • Renters Insurance
        • Car Insurance
        • Pet Insurance
        • Umbrella Insurance
        • Disability Insurance
        • Tuition Insurance
        • Travel Insurance
      • Credit Tools

        • Best Budgeting Apps
        • Cash Advance Apps
        • How To Get A Free Credit Score Report
        • Best Credit Monitoring Services For 2023
        • Debt Settlement: Inside The Secret World
        • Credit Repair Explained: Should You Pay For Help?
        • Best Personal Loan Companies And Lenders
        • Online Loan Companies To Borrow From Home
      • Tax

        • Best Tax Software
        • Free Tax Software
        • IRS Tax Refund Calendar
        • Common IRS Questions and Errors
        • Federal Tax Brackets
        • Capital Gains Tax Brackets
        • 401k Contribution Limits
        • IRA Contribution Limits
        • HSA Contribution Limits
  • Forum
  • Search
Home » Taxes » What Is FICA Tax?

What Is FICA Tax?

Updated: June 28, 2022 By Robert Farrington

Tweet
Share
Share
Pin
Email
Print

At The College Investor, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own. Any investing information provided on this page is for educational purposes only. The College Investor does not offer investment advisor or brokerage services, nor does it recommend buying or selling particular stocks, securities, or other investments. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. TheCollegeInvestor.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The College Investor does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. TheCollegeInvestor.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

FICA Tax

Figuring out taxes on your own for the first time? One of the most important types of taxes to understand are FICA taxes (also called payroll taxes). This is different than income tax, which you also pay, but this also comes out of your paycheck.

This is a tax you pay on every dollar of earned income (up to $137,700 for part of the tax), so it is important to understand it. Your employer also pays FICA taxes on you for every dollar earned - so many employers count FICA as part of their total compensation for an employee.

Here’s what you need to know about FICA taxes, and how they will affect your bottom line.

Table of Contents
What Is FICA?
Who Pays FICA Tax?
What Is The Tax Rate?
Is All Income Subject To FICA Taxes?
How Do I Pay These If I'm Self-Employed?
What If I Overpaid?

What Is FICA?

Federal Insurance Contributions Act (FICA) taxes are a type of tax called payroll taxes. They include a Social Security tax, and a Medicare tax which are intended to fund the Social Security and Medicare programs in the United States.

FICA taxes are paid in addition to other types of taxes such as the Federal income tax or your State income tax.

Who Pays FICA Tax?

By law, FICA tax payments are split between an employer and the employee. Each pays an equal share of the taxes.

If you work a typical job (where your employer gives you a W-2 at the end of the year), your employer will automatically deduct your share of the FICA taxes from your paycheck. It will send that share directly to the IRS for you. Additionally, your employer will pay its half of the tax directly to the IRS.

Self-employed people (including side-hustlers) must pay both the employer side and the employee side of the FICA tax.

What Is The Tax Rate?

Right now, the FICA tax is set at 6.2% for Social Security and 1.45% for Medicare. Both the employee and the employer must pay the 6.2% Social Security tax and the 1.45% Medicare tax. Together the FICA tax is 15.3% of all wages that you earn.

The social security tax is paid only on the first $142,800 of your income. That means if you earn $150,000, you won’t pay the 6.2% tax on the last $7,200 of your income. Your employer doesn’t have to pay its half of the Social Security tax on the last $7,200 of your income either. That’s a great tax break for high income earners.

However, the tax break doesn’t extend to the 1.45% Medicare portion of the tax. High income earners have to pay an additional 0.9% Medicare tax if their income exceeds certain thresholds.

In 2021, the thresholds were:

  • $200,000 for a Single Filer (or Head of Household)
  • $125,000 for married filing separately
  • $250,000 for married filing jointly

Is All Income Subject To FICA Taxes?

FICA taxes are paid on all earned income (up to the $142,800 wage base mentioned earlier). Income from rent, certain types of royalties, capital gains and dividends are not subject to FICA taxes.

However, you have to pay the tax on all earned income including your salary, tips, commissions and anything else that counts as wages. Contributing money to your 401(k), and other deductions allow you to avoid Federal income taxes, but you will still have to pay payroll taxes (FICA) on that wage income.

There are only a few ways to avoid paying FICA on wage income. First, you can contribute to an HSA. You can also contribute to a Flexible Savings Account (FSA) for childcare, medical care or both. If you pay legitimate business expenses for a business you own, you do not have to pay FICA taxes for those expenses.

The only other exceptions to this rule include people who earn income in unique circumstances.

Some students, especially those working as Research Assistants or Teaching Assistants will not have to pay FICA on their stipends. Likewise, if you work for a foreign employer, and you live outside of the United States, you don’t have to pay FICA on that income. Finally, pastors and other ministers who elect to do so can opt not to pay payroll taxes on their ministry income.

How Do I Pay These If I'm Self-Employed?

If you are self-employed (including people who run a business on the side), you will need to pay your payroll taxes yourself as part of your quarterly tax estimates. You can either do this through payroll (if you're an S Corp), or you do this on your Schedule C at tax time.

Since self-employed people have to pay both sides of the payroll tax, the FICA tax burden is 15.3% of all income you earn as a self-employed person. On top of that, you’ll need to pay your Federal and state income taxes.

What If I Overpaid?

Most of the time, overpaying FICA taxes isn’t a problem when you have only one employer.

However, if you earned $75,000 from your main job, and $75,000 from a second job or side business, you could accidentally overpay your FICA taxes.

To receive a refund, you will need to claim a refund on line 69 of your 1040. Every major tax filing software and a good accountant will catch this issue for you. The software (or the accountant) will ensure that you request a refund for the appropriate amount on your taxes.

Robert Farrington
Robert Farrington

Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.

He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.

He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.

What Is FICA Tax?
Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
Subscribe
Connect with
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
Notify of

I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree

0 Comments
Inline Feedbacks
View all comments

Primary Sidebar

Tax Resources

Featured Tax Reviews

>  H&R Block (recommended)
>  TurboTax (recommended)
>  Cash App Taxes
>  TaxSlayer
>  TaxAct
>  FreeTaxUSA

Tax Software

  • Best Tax Software 2023
  • Free Tax Software 2023
  • Best Crypto And NFT Tax Software For 2022

Tax Brackets

  • Federal Tax Income Brackets
  • Capital Gains Tax Brackets

More on Taxes

  • When To Expect My Tax Refund? The IRS Tax Refund Calendar 2023
  • Common IRS Where’s My Refund Questions and Errors
  • IRS Where’s My Refund Reference Codes
  • TurboTax, H&R Block, TaxAct, And TaxSlayer Pricing Comparison
  • The Best Tax Software For Student Loan Borrowers
  • How To Find The Best Tax Software For Students And Recent Grads
  • The Most Common Tax Deductions
  • Stopping Tax Offsets Due To Student Loan Debt
  • Tax Resource And Help Center

Footer

Who We Are

The College Investor is an independent, advertising-supported financial media publisher, focusing on news, product reviews, and comparisons.

Connect

  • Contact Us
  • Advertise
  • Press & Media

About

  • About
  • Our Team
  • Podcast
  • Editorial Guidelines
  • How We Make Money
  • Archives

Social

Copyright © 2023 · The College Investor · Privacy Policy ·Terms of Service · DO NOT Sell My Personal Information

wpDiscuz