Look at any pay stub and you'll find a set of deductions that aren't federal income tax — they're labeled "Social Security" and "Medicare," and together they're collectively known as FICA taxes. FICA stands for the Federal Insurance Contributions Act, the 1935 law that established the payroll tax system funding Social Security, and later Medicare. Unlike federal income tax, FICA isn't based on your bracket or your deductions — it's a flat percentage of wages, withheld automatically and matched by your employer. Understanding exactly what those percentages are, where the caps kick in, and how the math changes for self-employed workers helps you make sense of your paycheck and plan your finances accurately.
- FICA = Social Security (6.2%) + Medicare (1.45%) = 7.65% total withheld from an employee's paycheck each pay period
- Employers match the full 7.65%, bringing the total FICA contribution to 15.3% of wages
- Social Security tax only applies up to the wage base: $176,100 in 2026 — earnings above that are not subject to Social Security tax
- Medicare has no wage cap; the 1.45% applies to every dollar of wages regardless of income level
- An additional 0.9% Medicare surtax applies to wages above $200,000 (single) / $250,000 (MFJ) — employee only, no employer match
- Self-employed individuals pay the full 15.3% as self-employment tax but can deduct half (7.65%) from gross income above-the-line
The Two Components of FICA
FICA is not a single tax — it's two separate taxes collected together on the same form. Each has its own rate, its own wage cap rules, and its own destination in the federal trust fund system.
Social Security Tax (OASDI)
The Social Security portion is officially called the Old-Age, Survivors, and Disability Insurance (OASDI) tax. The rate is 6.2% on employee wages, matched by an equal 6.2% employer contribution, for a combined 12.4% total contribution on every dollar of wages up to the annual wage base.
The Social Security wage base for 2026 is $176,100. Once your wages cross that threshold during the year, Social Security withholding stops entirely for the remainder of that calendar year. The wage base is adjusted annually based on national average wage growth — it has risen from $137,700 in 2020 to $176,100 in 2026, tracking the general increase in wage levels across the economy.
Here's what that cap means in practice: a worker earning $200,000 in wages pays Social Security tax on the first $176,100 only. Their employee-side Social Security tax is $176,100 × 6.2% = $10,918.20. The remaining $23,900 of wages above the cap generates no Social Security tax at all. Their employer also stops matching at that threshold.
Medicare Tax (HI)
The Medicare portion funds the Hospital Insurance (HI) trust fund, which pays for Medicare Part A — the hospital coverage component of Medicare. The rate is 1.45% from the employee and 1.45% from the employer, for a 2.9% combined total.
The critical difference from Social Security: Medicare has no wage base cap. The 1.45% applies to every dollar of wages, from the first dollar to the millionth. A surgeon earning $800,000 pays 1.45% Medicare tax on all $800,000 of wages — the employer matches that on all $800,000 as well. This uncapped structure reflects Medicare's broader coverage mandate compared to Social Security's wage-indexed benefit formula.
The Additional Medicare Tax
The Affordable Care Act (ACA) of 2010 added a third layer to the FICA system for high earners: the Additional Medicare Tax of 0.9%. This surtax applies to wages (and self-employment income) above:
- $200,000 for Single, Head of Household, and Married Filing Separately filers
- $250,000 for Married Filing Jointly filers
Unlike regular Medicare tax, the Additional Medicare Tax is employee-only — employers do not match it. Employers are required to withhold the 0.9% automatically once an employee's wages exceed $200,000 in a calendar year, regardless of the employee's ultimate filing status. If a married couple's combined wages are under $250,000 but one spouse earns over $200,000, the employer still withholds the 0.9% on that employee — and the couple may actually get a credit when they file jointly. Conversely, if each spouse earns $150,000 ($300,000 combined), no withholding happens during the year, but the couple will owe 0.9% on $50,000 ($300,000 − $250,000 MFJ threshold = $450 additional tax) when they file.
Example: A single filer earns $300,000. Social Security tax applies to the first $176,100 ($10,918.20 employee share). Regular Medicare: 1.45% × $300,000 = $4,350. Additional Medicare Tax: 0.9% × ($300,000 − $200,000) = 0.9% × $100,000 = $900. Total employee-side FICA: $10,918.20 + $4,350 + $900 = $16,168.20.
FICA Breakdown Table (2026)
| Component | Employee Rate | Employer Rate | Total | Wage Cap |
|---|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | 12.4% | $176,100 |
| Medicare (HI) | 1.45% | 1.45% | 2.9% | None |
| Additional Medicare Tax | 0.9% | 0% | 0.9% | Above $200k (single) / $250k (MFJ) |
| Total (up to wage base) | 7.65% | 7.65% | 15.3% | — |
What FICA Costs on a $100,000 Salary
For a W-2 employee earning $100,000, the math is straightforward. Since $100,000 is below the $176,100 Social Security wage base, both taxes apply at their standard rates:
- Social Security: $100,000 × 6.2% = $6,200
- Medicare: $100,000 × 1.45% = $1,450
- Total employee FICA: $7,650
The employer also contributes $7,650 on this employee's behalf — money the employee never sees directly, but which represents real compensation cost to the business. Total FICA flowing to the federal government on this $100,000 salary: $15,300.
Self-Employed: Paying Both Sides
When you work as a W-2 employee, your employer covers half of FICA. When you're self-employed — running a freelance business, operating as a sole proprietor or single-member LLC, or earning 1099 income — there's no employer to split the bill. You pay both halves yourself in the form of self-employment (SE) tax, calculated on Schedule SE.
The SE tax rate is 15.3% — but it's applied to a slightly reduced income figure. The IRS allows you to multiply your net self-employment income by 0.9235 (which equals 1 − 0.0765) before applying the 15.3% rate. This adjustment approximates the deduction employees get because their wages are reduced by the employer's share before the employee's portion is calculated.
The formula: SE Tax = Net SE Income × 0.9235 × 15.3% (on the first $176,100 of net SE income), then + Net SE Income × 0.9235 × 2.9% on amounts above the Social Security wage base.
Example calculation for $80,000 of net self-employment income:
- SE income subject to SE tax: $80,000 × 0.9235 = $73,880
- SE tax: $73,880 × 15.3% = $11,304
- Deductible half of SE tax: $11,304 ÷ 2 = $5,652 reduction in AGI
That above-the-line deduction for half of SE tax is one of the self-employed worker's most valuable tax benefits. It reduces your adjusted gross income — which in turn reduces your federal income tax — partially offsetting the burden of paying both sides of FICA.
Why the Employer Match Matters for W-2 vs. 1099 Comparisons
When comparing a salaried W-2 job offer to a 1099 consulting engagement — or evaluating whether to leave employment to go independent — the employer's 7.65% FICA match is one of the most frequently overlooked cost differences. That match is part of your total employment cost to the company, and when you become self-employed, you absorb it yourself.
Concretely: if a company offers you $100,000 as a W-2 salary, your FICA cost to you is $7,650. Your employer separately pays $7,650 in FICA on top of your salary — your true "cost" to them is $107,650. If you negotiate a $100,000 1099 contract for the same work, you now owe both halves — approximately $14,130 in SE tax on that income (using the 0.9235 calculation) rather than $7,650. That's roughly $6,500 more in FICA-equivalent taxes on the same gross pay. The 1099 contract would need to be meaningfully higher to produce the same after-FICA income as the W-2 position.
Where the Money Goes
FICA contributions aren't deposited into individual accounts — they fund two separate federal trust funds. The Social Security taxes (OASDI) flow into the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. These funds pay current Social Security retirement benefits, survivor benefits for families of deceased workers, and disability benefits. The Medicare taxes (HI) fund the Hospital Insurance trust fund, which finances Medicare Part A — inpatient hospital care, skilled nursing facility care, and hospice services for Medicare-eligible individuals.
You do not accumulate "your" FICA contributions in a dedicated account. Current workers' FICA taxes primarily fund benefits for current beneficiaries — a pay-as-you-go design that creates the actuarial pressures that policymakers periodically debate. Your eventual Social Security benefit will be calculated based on your 35 highest earning years, indexed for wage growth — so the wages on which you paid SS tax do influence your future benefit, even though the money itself has long since flowed to current beneficiaries.
Use the Take-Home Pay Calculator to see exactly how FICA withholding affects your net paycheck at your specific salary, and the Self-Employment Tax Calculator to model SE tax on any level of freelance income.