When you look at your pay stub, you’ll notice a significant chunk of money labeled under “FICA” or broken down into “Social Security” and “Medicare.” For many U.S. workers, these deductions can be confusing. Why are they there? Where does the money go? And most importantly, how do they affect your final take-home pay?
FICA stands for the Federal Insurance Contributions Act. It is a mandatory federal payroll tax that funds two of the most critical social safety nets in the United States: Social Security and Medicare. Whether you are an hourly worker or a high-salaried executive, understanding FICA is essential for accurate financial planning.
The Two Pillars of FICA: Social Security and Medicare
FICA is actually a combination of two separate taxes. Every time you get paid, both you and your employer contribute a percentage of your earnings to these programs.
1. Social Security (OASDI)
The Social Security portion, officially known as Old-Age, Survivors, and Disability Insurance (OASDI), provides benefits for retirees, disabled individuals, and the surviving families of deceased workers.
- The Rate: The current tax rate for Social Security is 6.2% for the employee and 6.2% for the employer, totaling 12.4%.
- The Wage Base Limit: Unlike some other taxes, Social Security is only taxed on income up to a certain limit. For 2025, this limit was $176,100. For 2026, the Social Security Administration has announced an increase to $184,500. Any dollar you earn above this threshold is not subject to Social Security tax.
2. Medicare (HI)
The Medicare portion funds the Hospital Insurance (HI) program, which provides health insurance for Americans aged 65 and older and younger people with certain disabilities.
- The Rate: The standard Medicare tax rate is 1.45% for both the employee and the employer (2.9% total).
- No Wage Limit: Unlike Social Security, there is no income cap on Medicare taxes. You pay 1.45% on every dollar you earn, regardless of how much you make.
The 2026 FICA Adjustments: What’s Changing?
As we transition into 2026, inflation indexing has triggered several updates that will impact your paycheck. The most notable change is the increase in the Social Security Wage Base.
In 2025, a worker earning $200,000 only paid Social Security tax on the first $176,100. In 2026, that same worker will pay the 6.2% tax on the first $184,500. This means high-income earners will see a slight decrease in their annual net pay (roughly an additional $520.80 in taxes) because more of their income is now subject to the tax.
High Earners and the Additional Medicare Tax
If you are a high earner, FICA has an extra layer called the Additional Medicare Tax.
Introduced as part of the Affordable Care Act, this is a 0.9% tax that applies once your income exceeds certain thresholds:
- $200,000 for single filers.
- $250,000 for married couples filing jointly.
It is important to note that employers do not match this 0.9% tax; it is paid entirely by the employee. If you fall into this category, your total Medicare tax rate on income above the threshold becomes 2.35% (1.45% standard + 0.9% additional).
FICA for the Self-Employed: The SECA Tax
If you are a freelancer or a small business owner using our U.S. States Salary Calculator to estimate your taxes, you might notice your FICA burden is doubled. This is because of the Self-Employment Contributions Act (SECA).
Since you are both the employer and the employee, you must pay both halves of FICA:
- 12.4% for Social Security.
- 2.9% for Medicare.
- Total: 15.3%.
The “silver lining” is that the IRS allows self-employed individuals to deduct the “employer” half of this tax on their federal income tax return, which helps lower their overall taxable income.
How FICA Impacts Your Take-Home Pay
Because FICA is a “flat” tax (until you hit the wage cap), it feels different than federal income tax, which is “progressive.” From your very first dollar earned, 7.65% is immediately set aside for FICA.
Example Calculation (2026 Data):
If you earn $100,000 annually:
- Social Security Tax: $100,000 x 6.2% = $6,200
- Medicare Tax: $100,000 x 1.45% = $1,450
- Total FICA Deduction: $7,650
This $7,650 will be deducted from your gross pay before you even consider federal or state income taxes.
Conclusion
FICA taxes are a constant presence in American paychecks. While they reduce your immediate take-home pay, they serve as a mandatory contribution toward your future retirement and healthcare needs. By staying informed about the annual changes to the Social Security wage base and Medicare surcharges, you can better manage your household budget and avoid surprises during tax season.
To see exactly how FICA and other taxes affect your specific salary in your state, use our U.S. States Salary Calculator for a real-time breakdown.