Glossary
FICA
Definition
FICA is the Federal Insurance Contributions Act tax that funds Social Security and Medicare, withheld from wages: 6.2% Social Security + 1.45% Medicare (7.65%)2026 · SSA and IRS. Employers pay a matching share. Social Security tax stops at the annual wage base; Medicare has no cap.
How FICA works
Social Security tax applies only up to the $184,5002026 · SSA wage base. High earners also pay the Additional Medicare Tax.
Pre-tax 401(k) deferrals don't reduce FICA wages; cafeteria-plan health premiums and HSA payroll contributions generally do.
Why it matters to a firm
FICA explains why paychecks shrink more than income tax suggests, and why the self-employed pay both halves.
| 2026 figure | Source |
|---|---|
| Employee FICA: Social Security / Medicare: 6.2% Social Security + 1.45% Medicare (7.65%) | SSA and IRS |
| Social Security wage base (taxable maximum): $184,500 | SSA |
Questions about FICA
Do 401(k) contributions reduce FICA?
No.
Does the employer pay too?
Yes, a matching share.
Is there a cap?
For Social Security, at the wage base; Medicare has none.
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Related terms: Social Security wage base · Additional Medicare Tax · Self-employment tax
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