FICA
Last reviewed 2026-05-11 by Asad Ali, Founder & CEO
Federal Insurance Contributions Act taxes that fund Social Security and Medicare.
FICA is the federal law requiring employers and employees to each contribute to Social Security and Medicare. Social Security tax is 6.2% on wages up to the annual wage base ($168,600 in 2024; verify current year's threshold with the IRS as it adjusts annually for inflation). Medicare tax is 1.45% on all wages with no cap. An Additional Medicare Tax of 0.9% applies to employee wages exceeding $200,000 (single filer threshold for employer withholding) — the employer must begin withholding it but does not match it. The employer matches the regular 6.2% Social Security and 1.45% Medicare portions. Self-employed individuals pay both the employee and employer portions through self-employment tax on Schedule SE — 12.4% Social Security plus 2.9% Medicare = 15.3%, with half deductible as an above-the-line adjustment. FICA funds the OASDI (Old Age, Survivors, and Disability Insurance) trust fund and the HI (Hospital Insurance) Medicare Part A trust fund. See IRS Publication 15 for current rates and limits.
Formula
Employee FICA = 6.2% × min(wages, SS wage base) + 1.45% × wages + 0.9% × max(0, wages − $200,000). Employer match = 6.2% × min(wages, SS wage base) + 1.45% × wages (no Additional Medicare match).Example
A W-2 employee earns $100,000 in 2024. FICA withheld from paychecks = $100,000 × 7.65% = $7,650 ($6,200 Social Security + $1,450 Medicare). Employer matches with another $7,650, for a combined $15,300 paid into FICA. If the same employee earned $250,000, Social Security withholding caps at $168,600 × 6.2% = $10,453.20, Medicare runs on the full $250,000 at 1.45% = $3,625, and the Additional Medicare Tax of 0.9% applies to the $50,000 over $200,000 = $450. Total employee FICA = $14,528.20. The employer matches $10,453.20 + $3,625 = $14,078.20 (does NOT match the $450 Additional Medicare).
Why It Matters for Your Business
FICA represents a significant cost for both employers (matching portion) and employees (withheld portion), and self-employed individuals effectively pay double through self-employment tax, making FICA planning a major lever for S-corp election decisions.
Practical Tips
- •Verify the current year's Social Security wage base with the SSA every January — it changes annually and miscoding causes year-end W-2 errors
- •High-earning employees should review FICA withholding mid-year if they have multiple employers — each employer caps Social Security separately, so combined withholding may exceed the cap (recovered as a refundable credit on Form 1040)
- •The S-corp election is the most common FICA reduction strategy for profitable owner-operators — but requires a "reasonable salary," not a token amount, to withstand IRS scrutiny
- •Self-employed individuals can deduct half of SE tax as an above-the-line adjustment on Schedule 1 — never forget to claim this, as it directly reduces AGI
Common Questions About FICA
How is fica calculated?
The formula is: Employee FICA = 6.2% × min(wages, SS wage base) + 1.45% × wages + 0.9% × max(0, wages − $200,000). Employer match = 6.2% × min(wages, SS wage base) + 1.45% × wages (no Additional Medicare match).. See the worked example below for a step-by-step calculation using realistic numbers.
What is an example of fica?
A W-2 employee earns $100,000 in 2024. FICA withheld from paychecks = $100,000 × 7.65% = $7,650 ($6,200 Social Security + $1,450 Medicare). Employer matches with another $7,650, for a combined $15,300 paid into FICA. If the same employee earned $250,000, Social Security withholding caps at $168,600 × 6.2% = $10,453.20, Medicare runs on the full $250,000 at 1.45% = $3,625, and the Additional Medicare Tax of 0.9% applies to the $50,000 over $200,000 = $450. Total employee FICA = $14,528.20. The employer matches $10,453.20 + $3,625 = $14,078.20 (does NOT match the $450 Additional Medicare).
Why does fica matter for my business?
FICA represents a significant cost for both employers (matching portion) and employees (withheld portion), and self-employed individuals effectively pay double through self-employment tax, making FICA planning a major lever for S-corp election decisions.
How does FiscalInsights help with fica?
FiscalInsights tracks fica automatically as part of its AI bookkeeping workflow. Connect your bank accounts and the platform handles categorization, reconciliation, and reporting without manual entry.
Related Terms
More Taxes Terms
Tax Deduction
An expense that reduces taxable income.
Estimated Taxes
Quarterly tax payments made by self-employed individuals and businesses.
Form 1099
IRS forms reporting various types of income other than wages.
Form W-2
Annual statement from employers showing employee wages and taxes withheld.
Payroll Tax
Taxes withheld from employee wages for Social Security and Medicare, plus employer-side employment taxes.
Related Taxes Guides
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