Definition
A federal payroll tax that funds Social Security and Medicare programmes, split equally between employers and employees, with each paying 7.65% of the employee's gross wages (6.2% for Social Security and 1.45% for Medicare).
US Context
FICA applies to virtually all wages paid in the United States. The Social Security wage base is adjusted annually by the SSA — it has increased from $142,800 in 2021 to $168,600 in 2024. Employers must track cumulative earnings to stop Social Security withholding when the cap is reached. The Additional Medicare Tax of 0.9% on high earners took effect in 2013 under the ACA. FICA taxes are the single largest payroll expense for most employers beyond wages themselves.
Best Practices
- Monitor cumulative employee earnings to stop Social Security withholding when the annual wage base limit is reached
- Begin withholding the Additional Medicare Tax of 0.9% when an employee's wages exceed $200,000 in the calendar year
- Deposit FICA taxes on time according to the IRS deposit schedule to avoid failure-to-deposit penalties
- Reconcile quarterly Form 941 filings against payroll records and annual W-2 totals
Frequently Asked Questions
What is the current FICA tax rate?
The total FICA rate is 15.3% — split equally between employer and employee at 7.65% each. This consists of 6.2% for Social Security (up to the annual wage base) and 1.45% for Medicare (no wage cap). High earners also pay an additional 0.9% Medicare tax.
Is there a cap on FICA taxes?
The Social Security portion (6.2%) is capped at the annual wage base limit ($168,600 in 2024). Once an employee's wages exceed this amount, no further Social Security tax is withheld. The Medicare portion (1.45%) has no cap and applies to all wages.
Do employers pay FICA on bonuses and commissions?
Yes. FICA taxes apply to all taxable compensation including bonuses, commissions, tips, and non-cash fringe benefits. The same rates and wage base limits apply as for regular wages.