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Federal Insurance Contributions Act. The payroll tax that funds Social Security and Medicare.
Why It Matters
FICA is why your paycheck is smaller than your salary. It takes 7.65% of your gross pay (6.2% for Social Security, 1.45% for Medicare), and your employer pays another 7.65%. Self-employed workers pay both halves - 15.3% total. Understanding FICA helps you plan your actual take-home pay and why tax-advantaged accounts like 401(k)s are so valuable.
Key Points
- Social Security tax (6.2%) applies only up to $168,600 in 2024 - earnings above that are exempt
- Medicare tax (1.45%) has no income cap, plus an extra 0.9% on income over $200,000
- FICA taxes are separate from federal income tax - you pay both
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Common Questions
Federal Insurance Contributions Act. The payroll tax that funds Social Security and Medicare. FICA is why your paycheck is smaller than your salary. It takes 7.
FICA is why your paycheck is smaller than your salary. It takes 7.65% of your gross pay (6.2% for Social Security, 1.45% for Medicare), and your employer pays another 7.65%. Self-employed workers pay both halves - 15.3% total. Understanding FICA helps you plan your actual take-home pay and why tax-advantaged accounts like 401(k)s are so valuable.
Social Security tax (6.2%) applies only up to $168,600 in 2024 - earnings above that are exempt
Medicare tax (1.45%) has no income cap, plus an extra 0.9% on income over $200,000
FICA taxes are separate from federal income tax - you pay both