FICA explained: Social Security, Medicare and the wage base

FICA is the tax that quietly takes the biggest predictable bite out of most paychecks, and it’s widely misunderstood — not least because it’s really two taxes wearing one name. Understanding how it’s built explains a lot about paychecks, employer costs and year-end limits. (Rates below are longstanding, but the Social Security wage base changes every year — always confirm the current figure. This is general guidance, not tax advice.)

FICA is Social Security + Medicare

FICA (the Federal Insurance Contributions Act) funds two programs, and it’s split evenly between employee and employer — both pay a matching share.

Social Security: a rate with a ceiling

Social Security is withheld at 6.2% from the employee and matched with 6.2% from the employer — but only up to an annual wage base. Once an employee’s wages for the year cross that ceiling, Social Security stops for the rest of the year, for both sides. The wage base rises most years, so it has to be tracked, and — crucially — an employee’s prior wages from earlier in the year (or a mid-year job change) must be carried in, or the limit is applied wrongly.

Medicare: a rate with no ceiling

Medicare is withheld at 1.45% from the employee and matched by 1.45% from the employer — with no wage cap. Every dollar of wages is subject to it, all year.

Additional Medicare: the employee-only extra

Above a high wage threshold, an Additional Medicare Tax of 0.9% applies — and this one is employee-only. The employer withholds it once wages pass the threshold but does not match it. This asymmetry is a common payroll error: treating the 0.9% as if the employer owed a matching share.

Why the details matter

These mechanics drive real numbers. The wage base is why a high earner’s take-home rises partway through the year (Social Security stops). Prior-wage carry-in is why mid-year hires need their year-to-date figures. And the employer match is a big part of why an employee costs more than their salary.