FICA, the Federal Insurance Contributions Act, is the federal payroll tax that funds Social Security and Medicare. In 2026 employees and employers each pay 6.2% for Social Security on wages up to $184,500 and 1.45% for Medicare on all wages.
Key takeaways
- The combined FICA rate is 15.3%: 7.65% withheld from the employee and 7.65% matched by the employer.
- Social Security tax stops once an employee's 2026 wages reach $184,500. Medicare has no cap.
- Employees earning over $200,000 also owe 0.9% Additional Medicare Tax, which employers withhold but don't match.
- FICA is reported quarterly on Form 941 and annually on the W-2.
How FICA works
Every paycheck triggers two FICA calculations. Social Security, known formally as Old-Age, Survivors, and Disability Insurance, is 6.2% of wages for the employee and another 6.2% for the employer. Medicare, or Hospital Insurance, is 1.45% from each side. Together that's 7.65% withheld from the employee and 7.65% paid by the company.
Social Security applies only up to the annual wage base, which the Social Security Administration adjusts each year. For 2026 it is $184,500 (Davis Wright Tremaine, IRS 2026 benefit plan limits), so the most an employee can owe in Social Security tax this year is $11,439, and the employer owes the same. Medicare keeps going on every dollar. Once an employee's wages for the year pass $200,000, you must also withhold the 0.9% Additional Medicare Tax starting with that pay period, regardless of filing status. There's no employer match on that piece (IRS Publication 15 (Circular E), Employer's Tax Guide).
Not every dollar of gross pay is FICA wages. Section 125 cafeteria plan premiums and HSA contributions made through payroll are exempt. Traditional 401(k) deferrals are not exempt, which is a common setup error in new payroll systems.
FICA example
A sales director earns $210,000 in base salary in 2026, paid semi-monthly at $8,750 per period, with no pre-tax deductions.
- Social Security: 6.2% of $8,750 is $542.50 per period. Her wages reach $184,500 partway through the 22nd payroll, so Social Security withholding stops there for the year. Her annual total is $11,439, and the employer pays the same.
- Medicare: 1.45% of $8,750 is $126.88 per period, all year, from both sides.
- Additional Medicare: her year-to-date wages pass $200,000 in the 23rd payroll. From then on you withhold another 0.9% on wages above $200,000, which comes to $90 on the final $10,000. The employer doesn't match it.
Our employer payroll tax calculator runs this math for every employee, including the wage base cap.
Why FICA matters for employers
FICA is the largest payroll tax most employers pay, and it's a trust fund tax. The employee's share is money you hold for the government, so failing to deposit it can make owners and payroll managers personally liable under the trust fund recovery penalty. The IRS treats late deposits seriously, with penalties that grow the longer the money is late.
FICA also shapes your real cost per employee. BLS data shows private employers spent an average of $46.89 per hour worked on total compensation in June 2026, with 30% of that going to benefits, a category that includes legally required payroll taxes like FICA (BLS, employer compensation costs, June 2026). When you budget a new hire, add at least 7.65% on top of salary for FICA alone.
Common FICA mistakes to avoid
Stopping Medicare at the wage base
Only Social Security has a cap. Medicare tax applies to every dollar of wages.
Not refunding over-withheld Social Security
When an employee changes jobs mid-year, each employer withholds up to the cap. The employee claims the excess on their tax return; the employer can't adjust it.
Matching the 0.9% Additional Medicare Tax
It is employee-only. Employers withhold it but owe no matching share.
Treating 401(k) deferrals as FICA-exempt
Traditional and Roth deferrals both count as FICA wages.
FICA: questions people also ask
What does FICA stand for?
What is the FICA tax rate for 2026?
Is FICA the same as federal income tax?
Do independent contractors pay FICA?
Can an employee opt out of FICA?
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HRTally glossary entries are written by people who have run US payroll, benefits, and HR operations, then checked line by line against primary sources such as the IRS, Department of Labor, EEOC, and Bureau of Labor Statistics. Dollar limits and rates are for 2026 unless stated. We review every entry at least twice a year and whenever a rule changes. This page explains general rules and isn't legal or tax advice; state law can differ. Read our editorial standards.
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<blockquote>FICA, the Federal Insurance Contributions Act, is the federal payroll tax that funds Social Security and Medicare. In 2026 employees and employers each pay 6.2% for Social Security on wages up to $184,500 and 1.45% for Medicare on all wages.</blockquote><p>Source: <a href="https://www.hrtally.com/hr-glossary/fica/">HRTally HR Glossary, FICA</a></p>
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.