Keeping track of all the types of payroll taxes is never easy. This includes understanding Federal Insurance Contributions Act (FICA) taxes when trying to meet payroll tax withholding requirements.
FICA taxes include Social Security and Medicare taxes for a total rate of 15.3%. Employers and employees split the FICA tax payment, each paying 7.65%. However, self-employed individuals must pay the whole FICA amount.
Self-employed FICA taxes are the same as self-employment taxes, but the process for reporting and paying differs if you're an employer versus a self-employed individual. Let’s look at exactly what FICA taxes are, the specific FICA tax rates and limits, and how to calculate and file these taxes.
How do FICA taxes work?
FICA taxes, short for Federal Insurance Contributions Act, are federal payroll taxes that fund Social Security and Medicare.
These programs provide crucial benefits for:
- Retirement: Ensuring financial security for individuals in their later years.
- Disability: Supporting those who can no longer work due to a disability.
- Survivors: Providing financial assistance to families of deceased workers.
- Healthcare: Medicare offers health insurance coverage for people 65 and older and some younger individuals with disabilities.
FICA taxes are shared between employers and employees. Employers withhold a percentage from each employee's paycheck and contribute an equal amount. Self-employed individuals are responsible for paying both the employer and employee portions of FICA, but more later.
The total FICA tax rate is 15.3%, which includes:
- Social Security: 12.4% (6.2% employee + 6.2% employer) This applies to earnings up to the Social Security wage base limit of $176,100 in 2025.
- Medicare: 2.9% (1.45% employee + 1.45% employer) There's no earnings limit for Medicare tax, though an additional 0.9% Medicare tax applies to higher earners (over $200,000 for single filers and $250,000 for married couples filing jointly).