FICA Tax

What is FICA Tax?

FICA, the Federal Insurance Contributions Act, is the federal payroll tax that funds Social Security and Medicare. It's split into two components collected together but tracked separately, and both the employee and employer contribute matching amounts on every paycheck. Indeed notes that most employers and employees are required to pay FICA taxes to the IRS, calculated by applying the Social Security and Medicare rates to gross pay.

What are the 2026 FICA Tax Rates and Wage Base?

Rates have stayed flat for years, but the wage base rises annually. SHRM reports that the maximum amount of earnings subject to Social Security tax rises to $184,500 for 2026, up from $176,100 in 2025.

Once an employee's year-to-date wages cross the Social Security wage base, that portion of withholding stops for the rest of the year, while Medicare withholding continues on every dollar earned, since it has no cap.

What is the Additional Medicare Tax?

High earners face one more layer on top of standard Medicare withholding. An extra 0.9% Additional Medicare Tax applies to wages above $200,000 for single filers and $250,000 for married couples filing jointly. Employers must withhold this additional amount once an employee's wages exceed $200,000 for the year, regardless of the employee's actual filing status, but there's no employer match for this specific portion.

How Does FICA Differ for Self-Employed Workers?

Self-employed individuals don't pay FICA in the traditional sense; they pay a parallel tax under the Self-Employed Contributions Act (SECA). Forbes explains that because there's no employer to split the cost, self-employed workers are responsible for both halves, the full 12.4% Social Security and 2.9% Medicare rate, though they can deduct the employer-equivalent portion on their income tax return to soften the impact.

Why Does Accurate FICA Withholding Matter for Employers?

FICA calculations sit at the center of every paycheck, directly shaping the gap between an employee's gross earnings and their actual take-home pay. Getting the wage base cap or Additional Medicare Tax threshold wrong is one of the more common payroll deduction errors, particularly for high earners who cross the Social Security cap partway through the year.

Certain fringe benefits and imputed income items, like excess group term life insurance, are also subject to FICA even though they aren't cash wages, which is another common source of underwithholding. Keeping payroll systems updated with the current year's thresholds is a straightforward but essential piece of HR compliance, since under-withholding creates liability for both the employer and the employee down the line.

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Frequently Asked Questions

Q: What is the 2026 Social Security wage base?

A: The 2026 Social Security wage base is $184,500, up from $176,100 in 2025. Earnings above this amount are not subject to the 6.2% Social Security tax.

Q: Is there a cap on Medicare tax?

A: No. Unlike Social Security, Medicare tax applies to all covered wages with no upper limit.

Q: What is the Additional Medicare Tax?

A: An extra 0.9% tax on wages above $200,000 for single filers or $250,000 for married couples filing jointly. Employers withhold it but don't match it.

Q: How is FICA different for self-employed workers?

A: Self-employed individuals pay both the employee and employer portions through SECA, a combined 15.3% rate, though they can deduct the employer-equivalent half on their tax return.

Q: Do employers match every part of FICA?

A: Employers match the standard 6.2% Social Security and 1.45% Medicare rates, but there is no employer match for the 0.9% Additional Medicare Tax.