FICA is the payroll tax that funds Social Security and Medicare. In 2026 it takes 7.65% of an employee's wages, and the employer pays another 7.65% on top. That 7.65% splits into 6.2% for Social Security and 1.45% for Medicare. Those statutory rates haven't changed since 1990 — but the wage cap they apply to changes every year.
FICA stands for the Federal Insurance Contributions Act. The tax itself dates to the Social Security Act of 1935; the FICA name arrived in 1939, when Congress moved the tax into the Internal Revenue Code. On a pay stub it usually shows up as two lines — "Social Security" or "OASDI," and "Medicare."
Where the money goes
FICA is not general federal income tax. It's earmarked.
- Social Security (6.2%) funds retirement, disability, and survivor benefits — the OASDI program.
- Medicare (1.45%) funds Part A hospital insurance.
Income tax withholding is a separate line on the stub, driven by the employee's Form W-4. The two get confused constantly. FICA has no brackets and no standard deduction; it applies from the first dollar of covered wages.
Being exempt isn't impossible, but the exceptions are narrow and statutory: students working for the school they attend, certain nonresident students and scholars on F, J, M, and Q visas, members of certain religious sects with an approved exemption, and some state and local employees covered by a qualifying public retirement system. Publication 15, section 15 has the list. Outside those, an employee cannot elect out.
The 2026 numbers
The figures below are for tax year 2026, per IRS Topic No. 751 and Publication 15 (Circular E). Recheck them every January. The Social Security wage base is adjusted annually, and a stale cap means every paycheck you run is wrong.
Social Security: 6.2%, up to a cap
For 2026, Social Security tax applies only to the first $184,500 of an employee's wages — up from $176,100 in 2025. That's the "wage base limit," or "contribution and benefit base."
Once an employee crosses it, Social Security withholding stops for the rest of the calendar year and restarts in January. Maximum employee Social Security tax for 2026: $11,439.00, with the employer matching that amount.
The cap resets per employer, not per person — see below.
Medicare: 1.45%, no cap
No wage base limit. Every dollar of covered wages, employee and employer alike.
The extra 0.9% on high earners
The Additional Medicare Tax is 0.9%, and it behaves unlike anything else here. Its thresholds are statutory and not indexed for inflation.
- Employers must withhold it on wages over $200,000 paid to an employee in a calendar year, regardless of the employee's filing status.
- There is no employer match. It's employee-only.
- The employee's actual liability depends on filing status: $250,000 married filing jointly, $125,000 married filing separately, $200,000 for everyone else. That gets reconciled on Form 8959 with the individual return.
So an employee can have exactly the right amount withheld and still owe more at filing, or get some back. Normal, not an error.
Self-employed? You pay both halves
Sole proprietor, partner, or single-member LLC owner: there's no employer to split with. You pay self-employment tax at 15.3% — 12.4% Social Security plus 2.9% Medicare — computed on Schedule SE.
Three things soften it:
- You pay on 92.35% of net earnings from self-employment, not 100%.
- You deduct one-half of the self-employment tax when figuring adjusted gross income.
- If you also had W-2 wages, those count first against the Social Security wage base, so only what's left of the cap applies to your self-employment income.
The 0.9% surtax applies above the same thresholds.
What employers actually have to do
Withholding is the easy part. Deposits are where the penalties live.
- Deposit withheld FICA plus the employer match on a monthly or semiweekly schedule, determined by your lookback period. The wrong schedule earns penalties even when you paid every dollar.
- If accumulated employment tax liability reaches $100,000 on any day, deposit it by the next business day. It also changes your status: a monthly depositor who hits $100,000 becomes a semiweekly depositor for the rest of that calendar year and all of the next.
- Report quarterly on Form 941 — unless the IRS has sent you written notice to file Form 944 annually instead. You can't elect Form 944 on your own.
- Get Form W-2 to each employee by January 31, with Copy A and Form W-3 going to the Social Security Administration, not the IRS.
FUTA is not FICA. Federal unemployment tax is employer-only, never withheld from an employee's pay, and reported annually on Form 940. State unemployment tax is separate again.
Three things that trip people up
Two jobs in one year. Each employer applies the wage base independently. If your combined wages exceed the cap, too much Social Security tax came out, and you claim the excess as a credit on Schedule 3. But if a *single* employer over-withheld, that route is closed — the employer has to correct it, or you file Form 843.
Tips. For tax years 2025 through 2028, P.L. 119-21 allows a deduction of up to $25,000 of qualified tips, and it applies to income tax only. Tips stay fully subject to Social Security and Medicare tax, and employees still report tips of $20 or more in a month to their employer. "Tips are tax-free now" is wrong in the expensive direction.
Worker classification. Calling someone a contractor doesn't make them one. If the worker is reclassified, the employer owes both halves of FICA plus penalties. Get this right before the first payment.
Where to look it up
Go to the source.
- IRS Topic No. 751 — Social Security and Medicare withholding rates
- IRS Publication 15 (Circular E) — the employer's operating manual
- IRS Topic No. 560 — Additional Medicare Tax
- IRS Topic No. 757 — Form 941 and 944 deposit requirements
- SSA.gov — the annual contribution and benefit base
If you're generating pay statements, keep the employee and employer FICA amounts as distinct, auditable lines instead of one lumped total. That's what lets a stub be reconciled against a Form 941 later. UWageCo prepares payroll statements and business documents from the figures you enter, and every document carries a disclosure that the underlying data was supplied by the customer. Preparing a document is not filing: you or your accountant still make the deposits and file the returns.
This article is general information, not legal or tax advice. For your own situation, talk to a CPA, an enrolled agent, or a tax attorney, or contact the IRS directly.