The short answer: FICA is the tax that comes out of every paycheck before income tax does, and almost everyone with a job pays it. For 2026 it's 7.65% of your wages, with the Social Security portion capped at $184,500 of earnings. If you're checking your first pay stub and wondering where the money went, this is the line item, and it's separate from the federal income tax withheld a few lines above it.
Your employer also pays 7.65% on your behalf, which is why many employers count FICA as part of your total compensation. If you work for yourself, you pay both halves.
Here's what you need to know about FICA taxes, and how they affect your bottom line.
What Is FICA?
Federal Insurance Contributions Act (FICA) taxes are payroll taxes. They include a Social Security tax and a Medicare tax, and the money funds the Social Security and Medicare programs. The Social Security Administration calls its portion OASDI (Old-Age, Survivors, and Disability Insurance); the Medicare tax is sometimes labeled "Med" or "HI" (hospital insurance) on a pay stub.
FICA taxes are paid on top of other taxes such as the federal income tax and your state income tax. Unlike income tax, FICA has no standard deduction, no brackets, and no refund for overpaying unless you had more than one employer (more on that below).
Who Pays FICA Tax?
By law, FICA is split between an employer and the employee. Each pays an equal share.
If you work a typical job (your employer gives you a W-2 at the end of the year), your employer deducts your share from each paycheck and sends it to the IRS, along with its own matching share. You never have to calculate it, and nothing on your W-4 changes it; the W-4 only controls income tax withholding.
Self-employed people (including side hustlers) pay both the employer side and the employee side. The IRS calls this self-employment tax, and it applies once your net earnings from self-employment reach $400 for the year.
What Is The Tax Rate In 2026?
The FICA rate is 6.2% for Social Security and 1.45% for Medicare, a combined 7.65% for the employee. The employer pays the same 6.2% and 1.45%. Neither rate changed for 2026; what changes each year is the Social Security wage base, the maximum amount of earnings the 6.2% applies to.
| Employee | Employer | Self-employed | |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | 12.4% |
| Medicare (HI) | 1.45% | 1.45% | 2.9% |
| Total FICA rate | 7.65% | 7.65% | 15.3% |
The Social Security cap. The 6.2% Social Security tax is paid only on the first $184,500 of wages in 2026, according to the Social Security Administration. If you earn $185,000, you don't pay the 6.2% on the last $500, and neither does your employer. The most an employee can pay in Social Security tax in 2026 is $11,439 (6.2% of $184,500). For 2025 returns (the ones due in 2026), the base was $176,100 and the maximum was $10,918.20. The Social Security Administration sets the base each October along with the cost-of-living adjustment, so the 2027 number arrives in mid-October 2026.
The Medicare tax has no cap, and it goes up for high earners. Under the Additional Medicare Tax, you pay an extra 0.9% on wages and self-employment income above:
- $200,000 for single filers, head of household, and qualifying surviving spouses
- $250,000 for married filing jointly
- $125,000 for married filing separately
Those thresholds are set by statute and aren't adjusted for inflation, so more people cross them each year. There's no employer match on the extra 0.9%, and your employer starts withholding it once your wages at that job pass $200,000, regardless of your filing status. Married couples can end up over- or under-withheld and settle up on Form 8959 at tax time. (The Additional Medicare Tax is a different tax from the 3.8% Net Investment Income Tax, which applies to investment income above the same thresholds.)
How Much FICA Tax Do I Pay? (2026 Example)
FICA is a flat percentage, so the math is short. Take someone earning a $60,000 salary in 2026:
- Social Security: $60,000 × 6.2% = $3,720
- Medicare: $60,000 × 1.45% = $870
- Employee FICA: $4,590 ($382.50 a month, before any income tax withholding)
The employer pays another $4,590, so $9,180 goes to Social Security and Medicare on that one salary. That employer match is why a $60,000 job costs an employer at least $64,590, and why the take-home math on a raise never matches the raise.
For a single filer earning $250,000 in wages in 2026:
- Social Security: $184,500 × 6.2% = $11,439 (the cap; nothing on the last $65,500)
- Medicare: $250,000 × 1.45% = $3,625
- Additional Medicare Tax: $50,000 above $200,000 × 0.9% = $450
- Employee FICA: $15,514, an effective rate of 6.2% on the full $250,000
That's the shape of FICA: it takes a bigger share of a $60,000 paycheck (7.65%) than a $250,000 one (6.2%), which is the opposite of how the federal income tax brackets work.
Is All Income Subject To FICA Taxes?
FICA applies to earned income: salary, hourly wages, bonuses, commissions, tips, overtime, and anything else your employer reports as wages. Income from rent, most royalties, capital gains, interest, and dividends is not subject to FICA. Neither are unemployment benefits, Social Security benefits, or retirement account withdrawals.
Pre-tax retirement contributions don't help here. Contributing to your 401(k) lowers your income tax, but FICA is calculated on your wages before the 401(k) deferral comes out. The same is true of a traditional IRA deduction and the standard deduction: both reduce taxable income for income tax, and neither touches FICA.
There are a few ways to lower FICA on wage income. Contributions to a Health Savings Account (HSA) made through your employer's cafeteria plan come out before FICA; for 2026, the HSA limit is $4,400 for self-only coverage and $8,750 for family coverage. Health Flexible Spending Account (FSA) contributions work the same way, up to $3,400 in 2026, as do dependent care FSA contributions and the employee share of employer health premiums. If you own a business, legitimate business expenses reduce the profit that self-employment tax is calculated on.
Best HSA Providers
Save Taxes Invest For The Future
An HSA funded through payroll is the one retirement-style account that skips FICA as well as income tax. If your employer's HSA has high fees, you can still open your own and transfer the balance. Here are the HSA providers we rate highest.
Who's exempt. A short list of workers don't pay FICA on specific income:
- Students employed by their own school (research assistants, teaching assistants, work-study jobs) while enrolled and regularly attending classes, under the IRS student FICA exception.
- Ministers who file Form 4361 and receive IRS approval are exempt from self-employment tax on ministerial earnings.
- Certain nonresident students and scholars on F-1, J-1, M-1, or Q-1 visas, on wages connected to their visa purpose.
- Some state and local government employees covered by their own public retirement system instead of Social Security.
- U.S. citizens working abroad for a foreign employer generally don't pay FICA on that income (they may owe the host country's equivalent).
If you don't fit one of those, you can't opt out. There's no box on the W-4 or anywhere else that lets a regular employee decline Social Security and Medicare coverage.
No Tax On Tips And Overtime: What It Does And Doesn't Change
The One Big Beautiful Bill Act created two deductions that get described as "no tax on tips" and "no tax on overtime." Both are income tax deductions, and both leave FICA exactly where it was.
For tax years 2025 through 2028, workers in occupations the Treasury lists as customarily tipped can deduct up to $25,000 of qualified tips, and hourly workers can deduct the premium portion of overtime pay (the "half" in time-and-a-half) up to $12,500, or $25,000 on a joint return. Both deductions phase out once modified adjusted gross income passes $150,000 ($300,000 joint), and both are available whether or not you itemize. They're claimed on the new Schedule 1-A.
Payroll tax is a separate system. The IRS's 2026 Publication 15 (Circular E, the employer payroll tax instructions) says tips are "still generally subject to both the employer share and employee share of social security tax and Medicare tax," and uses the same language for overtime. Your employer keeps withholding 7.65% on every tipped dollar and every overtime hour, and keeps paying its 7.65% match.
Take a server with $30,000 in hourly wages and $20,000 in reported tips in 2026. The tips deduction removes $20,000 from income before income tax is calculated, which is worth $2,400 in the 12% bracket. FICA is still 7.65% of the full $50,000: $3,825, of which $1,530 is on the tips. The deduction is real money, but "no tax" overstates it, and the tips still need to be reported to the employer (anything over $20 a month) so they count toward your Social Security earnings record and the deduction itself.
How Do I Pay These If I'm Self-Employed?
If you're self-employed (including a business on the side), you pay your payroll taxes yourself as part of your quarterly estimated taxes, and the total is calculated on Schedule SE when you file. If you run an S corporation, the wages you pay yourself go through regular payroll withholding instead.
The rate is 15.3% (12.4% Social Security plus 2.9% Medicare), but it applies to 92.35% of your net profit, not the whole thing. That adjustment stands in for the employer half that a W-2 worker never sees in wages. You then deduct half of the self-employment tax on Schedule 1, line 15, which lowers your adjusted gross income for income tax purposes (but not the self-employment tax itself).
Here's the math on $60,000 of net profit in 2026:
- Net earnings subject to SE tax: $60,000 × 92.35% = $55,410
- Self-employment tax: $55,410 × 15.3% = $8,477.73
- Deduction for half of SE tax: $4,238.87 (reduces AGI)
Compare that to the $4,590 the W-2 employee paid on the same $60,000, and the cost of not having an employer match is about $3,900 a year. The Social Security cap works across both kinds of income: if your W-2 wages already reach $184,500, you don't pay the 12.4% Social Security part on any self-employment income that year, only the 2.9% Medicare part. And the 0.9% Additional Medicare Tax counts wages and self-employment income together against the same $200,000 / $250,000 / $125,000 thresholds.
Two thresholds to know: you owe self-employment tax once net earnings hit $400 for the year, and church employees owe it at $108.28. Estimated payments are due four times a year; here are the 2026 tax due dates.
What FICA Buys You
Social Security tax isn't money that disappears. You earn credits toward retirement, disability, and survivor benefits: one credit per $1,890 of earnings in 2026, up to four credits a year, and 40 credits (10 years of work) to qualify for retirement benefits. Your benefit is then calculated from your 35 highest-earning years, which is why wages above the $184,500 cap neither pay the tax nor count toward the benefit.
The 2026 maximum benefit for a worker retiring at full retirement age is $4,152 a month, and the average retired worker receives $2,071 a month after the 2.8% cost-of-living adjustment, per the SSA. Medicare tax works the same way: 40 credits gets you premium-free Medicare Part A at 65. If you're wondering whether to prioritize a 401(k) or Roth IRA on top of that, the answer is yes; Social Security replaces about 40% of pre-retirement income for a median earner, and less for higher earners.
What If I Overpaid FICA?
With one employer, overpaying is rare; payroll software stops the Social Security withholding at $184,500. With two employers it's common. If you earned $120,000 at your main job and $100,000 at a second job in 2026, each employer withheld 6.2% on its own payroll, so $13,640 in Social Security tax came out on $220,000 of wages. The maximum for the year is $11,439. You claim the $2,201 difference as a credit on Schedule 3 (Form 1040), line 11, and it comes back with your refund. Every major tax filing software does this automatically from your W-2s, and so will a decent accountant.
If a single employer withheld too much, the fix is different: the employer is supposed to correct it, and if it won't, you file Form 843 with the IRS rather than claiming it on your 1040. The Medicare portion can't be overpaid in the same way, since it has no cap, but the Additional Medicare Tax reconciles on Form 8959.
FICA Tax FAQ
Can I opt out of FICA?
No, unless you're in one of the exempt groups above (students working for their school, ministers with an approved Form 4361, certain nonresident visa holders, some public employees with their own pension system). A regular employee can't decline Social Security and Medicare coverage.
Does a 401(k) contribution reduce FICA?
No. Traditional 401(k) contributions reduce income tax, not FICA. HSA and FSA contributions through your employer's cafeteria plan reduce both. Here's how 401(k) contribution limits work for 2026.
I had two jobs and both took out Social Security. Do I get the extra back?
Yes, if your combined wages exceeded $184,500 in 2026. Claim the excess on Schedule 3, line 11, when you file. Your tax software will calculate it from your W-2s.
Do students pay FICA?
Students working for the school they attend, while enrolled and regularly attending classes, don't. Students working anywhere else do, from the first dollar. A summer job at a restaurant pays full FICA; a research assistantship at your own university usually doesn't.
Is FICA tax deductible?
Not for employees. Self-employed people deduct half of their self-employment tax on Schedule 1, line 15, which reduces adjusted gross income but not the self-employment tax itself.
Do the "no tax on tips" and "no tax on overtime" rules mean no FICA?
No. They're income tax deductions (up to $25,000 for tips, $12,500 or $25,000 joint for overtime, 2025 through 2028). Social Security and Medicare tax still come out of every tipped and overtime dollar; see the list of eligible tipped occupations for who can claim the tips deduction.
Final Thoughts
FICA is the simplest tax you pay and the one you have the least control over: 7.65% of every wage dollar, capped for Social Security at $184,500 in 2026, matched by your employer, and doubled if you're self-employed. The two things worth acting on are the ones most people miss. If you had more than one employer, check Schedule 3, line 11, before you file. And if you're choosing between retirement accounts, remember that a payroll HSA is the only one that skips FICA as well as income tax. The rest of your tax planning happens on the income tax side.
Editor: Clint Proctor Reviewed by: Chris Muller
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.