Understanding FICA taxes
Look at any pay stub and two deductions appear before income tax even starts: Social Security and Medicare — together, FICA, the Federal Insurance Contributions Act. For most workers FICA is the second-largest tax they pay, and for roughly a third of households it's larger than their federal income tax.
The 2026 numbers
| Tax | Employee rate | Employer rate | 2026 limit |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | First $184,500 of wages |
| Medicare | 1.45% | 1.45% | No limit |
| Additional Medicare | 0.9% | — | Wages above $200,000 |
Your employer matches your 6.2% + 1.45%, sending 15.3% total to the Treasury on your behalf (self-employed workers pay both halves — see our W-2 vs 1099 guide).
The wage base moves every year. The $184,500 Social Security cap for 2026 is indexed to national average wage growth (it was $176,100 in 2025 and $168,600 in 2024). Earn above it and Social Security tax stops for the year — the source of the "January raise" high earners notice when the meter resets.
Medicare never stops. The 1.45% applies to every dollar, and employers must withhold an extra 0.9% once your wages pass $200,000 in a calendar year, regardless of filing status. (The actual liability threshold is $250,000 for married filing jointly — reconciled on Form 8959 at filing time.)
What FICA buys you
FICA isn't a generic tax; it's a contribution record.
Social Security credits. You earn up to 4 credits per year (one per ~$1,800 of covered wages in 2026); 40 credits (10 years) makes you eligible for retirement benefits. Your benefit is computed from your highest 35 years of indexed earnings — which is why zero-earning years pull the average down.
Disability and survivor coverage. SSDI insures you if you become unable to work, and survivor benefits protect spouses and children — insurance many workers don't realize they're paying for.
Medicare Part A. Ten years of Medicare taxes buys premium-free hospital insurance at 65.
Common FICA situations
- Two jobs. Each employer withholds Social Security up to the cap independently; if your combined wages exceed $184,500, you'll over-pay and reclaim the excess as a credit on your 1040.
- Students. Enrolled students working at their own school are often FICA-exempt.
- Some public employees (about a quarter of state/local workers) are outside Social Security entirely, with pension systems instead.
- Pre-tax health premiums and FSA/HSA contributions reduce FICA wages; traditional 401(k) contributions do not — you pay FICA on them.
Why the cap is controversial
Earnings above the cap pay no Social Security tax, so measured as a share of total income, FICA is regressive at the top: a $184,500 earner and a $2M earner pay the same dollar amount of OASDI. Proposals to shore up the trust fund (projected to face a shortfall in the mid-2030s per the annual Trustees Report) typically involve raising or eliminating the cap, adjusting the rate, or changing benefits — a live policy debate through the 2020s.
The takeaway
On a $60,000 salary in 2026, FICA costs you $4,590 — silently, before withholding tables even apply. Model it together with federal and state tax in our paycheck calculator to see your true take-home rate.
Sources
- Social Security Administration, 2026 Social Security Changes (COLA fact sheet)
- IRS Topic No. 751, Social Security and Medicare Withholding Rates
- IRS, Questions and Answers on the Additional Medicare Tax
- SSA, Annual Report of the Board of Trustees (latest edition)
Estimates for reference only, based on 2026 published rates. Not tax, legal or financial advice.