What Is FICA Tax? 2026 Rates and How It’s Calculated

Have you ever seen “FICA” on your paycheck and wondered what it meant?

If you lived or worked in the United States in the last year, your FICA tax contributed to $579 billion in federal funding — that’s 32% of the government’s $1.78 trillion total revenue! Funds from the Federal Insurance Contributions Act (FICA) help finance the nation’s largest social insurance programs: Social Security and Medicare. Millions of retirees, beneficiaries and people with disabilities rely on these benefits, but workers aren’t the only ones who fund them.

Employees and employers are responsible for paying FICA taxes. Let’s take a closer look at what FICA is, how it works and how you can navigate this tricky payroll tax with confidence.

What is FICA (Federal Insurance Contributions Act)?

FICA generates money for Social Security and Medicare programs through taxes imposed on nearly every employee and employer in the United States. Signed under the Social Security Act of 1935, FICA was first enacted to provide financial benefits for retired workers aged 65 or older. In 1965, FICA expanded with the passage of the Medicare Act, a law that established a health insurance program for the elderly. Today, FICA provides the funding for both.

What does FICA tax include, and how does it work?

FICA is a U.S. federal payroll tax that is automatically deducted from an employee’s paycheck. But exactly how much is FICA tax? That depends on if you’re an employee or employer. FICA combines Social Security and Medicare taxes for a total rate of 15.3%, but the cost is split between each party. Specifically, 6.2% of an employee’s FICA taxable wages go to Social Security tax and 1.45% of their gross wages go to Medicare tax. The employer must match these percentages for a grand total of 15.3%.

Your nine-digit Social Security number tracks how much you pay. Employees earn credits for Social Security benefits as they continue to work and pay FICA taxes. The Social Security Administration uses the number of credits you’ve earned to determine your eligibility for Medicare, retirement or disability benefits and your family’s eligibility for survivor benefits once you reach retirement age.

2026 FICA tax changes and considerations

While the Social Security and Medicare tax rates may not have changed from 2025 to 2026, other changes could affect how FICA tax impacts employees and their employers.

Social Security wage base increase

In 2026, the Social Security wage base limit is $184,500. This is up from 2025’s wage base limit of $176,100. For employees, this figure is the maximum amount of earnings that qualify for the 6.2% Social Security tax. Since employers are obligated to match this tax, this increased wage base limit could mean both parties pay more in 2026, depending on how much an employee earns. Of course, for employees whose wages don’t exceed $184,500 per year, this change won’t have a noticeable impact.

High-earner Medicare tax implications

In 2026, the additional Medicare tax rate is 0.9% for “high earners.” A high-earner tax rate for Medicare applies to self-employment income or employed individuals who annually earn more than $200,000 if filing as single or a head of household. (This threshold is raised to $250,000 for married taxpayers filing jointly.)

Keep in mind the high-earner Medicare tax rate is in addition to the standard rate of 1.45%. This additional tax rate also carries no wage limit.

Self-Employment Contributions Act (SECA) updates for self-employed individuals

In 2026, the SECA tax rate is 15.3%, which is unchanged from 2025. However, the Social Security wage base limit has increased from $176,100 to $184,500, as it has for employed individuals. Keep in mind, self-employed individuals are effectively taxed as both employees and employers, hence the 15.3% rate. This, however, does not effectively double their total income that can be taxed for Social Security based on the current wage base limit.

State-level changes in State Unemployment Tax Act (SUTA) or paid leave programs

While the exact SUTA tax rate varies across the country, the following 23 states are opting to increase their SUTA wage base limit:

• Alaska
• Colorado
• Connecticut
• Delaware
• Hawaii
• Idaho
• Illinois
• Kansas
• Kentucky
• Minnesota
• Montana
• Nevada
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Oregon
• Rhode Island
• Utah
• Vermont
• Washington
• Wyoming

Given that the exact taxable wage base for SUTA — and the rate at which employees and employers may be taxed — can change depending on where your organization operates, you should consult a licensed tax professional before making any assumptions about these taxes.

For an in-depth breakdown of paid leave requirements across the country, read our blog post covering state PTO laws.

What is the maximum FICA taxable income amount?

Social Security limits the amount of income subject to taxation. For 2026’s earnings, that limit is $184,500. This amount is also referred to as the “wage base limit” or the “taxable maximum.” It changes every year depending on the national average wage index. However, this limit only applies to employees who pay Social Security taxes. There is no wage base limit for Medicare taxes.

In this instance, any employee who earned $184,500 or more in 2026 would contribute $11,439 to Social Security. Remember, the employer must match employee contributions dollar for dollar, so they would also pay $11,439 in Social Security taxes.

Employee and employer FICA contributions

Employers are legally obligated to withhold 6.2% for Social Security taxes and 1.45% for Medicare taxes from an employee’s FICA taxable wages. Employers must match employee contributions dollar for dollar. While these rates were unchanged from 2025, remember that the Social Security wage base limit rose to $184,500 in 2026.

In other words, paying FICA taxes is mandatory. However, it’s important to note that this tax only applies to an employee’s earned income. This includes:

• salary
• wages
• bonuses
• tips
• commissions
• taxable fringe benefits

Unearned income, sometimes called passive income, is exempt from FICA tax. This includes investment-type income such as taxable interest, ordinary dividends and capital gain distributions.

2026 FICA tax rates and limits

According to the IRS, FICA taxes include old-age, survivors and disability insurance taxes (Social Security), and hospital insurance taxes (Medicare). Different rates apply for each.

Social Security

• The current Social Security tax rate is 6.2% for employees and 6.2% for employers, or 12.4% total.

Medicare

• The current Medicare tax rate is 1.45% for employees and 1.45% for employers, or 2.9% total.
• Employers must withhold an additional 0.9% when an employee’s wages exceed $200,000 in a calendar year. There is no employer match for the Additional Medicare tax withholding rate.

Essentially, each party pays 7.65% of their earnings for a total FICA contribution of 15.3%.

How to calculate FICA taxes

To calculate an employee’s FICA taxes, multiply their FICA taxable wages by the current Social Security and Medicare tax rate. This number will also tell you the employer contribution.

Step 1: Calculate Social Security tax

To calculate the Social Security tax:

• Employee’s FICA taxable wages x 6.2% = Social Security tax contribution

Step 2: Calculate Medicare tax

To calculate the Medicare tax:

• Employee’s FICA taxable wages x 1.45% = Medicare tax contribution

Step 3: Calculate total FICA tax

To calculate the total FICA tax:

• Social Security tax contribution + Medicare tax contribution = total FICA tax

Here’s a helpful visual to show how to calculate FICA taxes for an employee whose FICA taxable wages were $4,000 for the pay period.

Who is exempt from FICA taxes?

Foreign students temporarily present in the United States in F-1, J-1 or M-1 status for less than five calendar years may be exempt from FICA tax on wages paid to them for services performed in the United States, according to the IRS.

FICA may exempt full-time students for the first five calendar years they live in the United States. If they are not a full-time student, the FICA exemption may cover their first two years.

Other tax rates to know

Payroll taxes take many forms, but every employer should understand how current tax rates affect their people and the places they operate.

SUTA tax

The State Unemployment Tax Act (SUTA) — also known as “state unemployment insurance” (SUI) — is a payroll tax required from employers. States place these taxes into their unemployment funds to pay benefits to employees who have separated from their employer.

Failing to pay SUTA can result in:

• fines
• penalty fees
• criminal charges to the employer

SUTA contribution rates vary by state. The state unemployment agency determines the contribution rates for positive-rated employers and negative-rated employers annually. Employers with a positive reserve ratio receive the lowest tax rates, while negative-ratio employers may encounter substantially higher rates.

You can use this comprehensive resource to verify the SUTA rates of states relevant to your employees and comply with confidence.

FUTA tax

The Federal Unemployment Tax Act (FUTA) generates money for national unemployment programs through taxes imposed on nearly any business with more than one worker. FUTA taxes fall on employers, not their staff. However, FUTA rates must be derived from employees’ wages.

The current FUTA tax rate is 6% of the first $7,000 a business pays to an employee each year. Enterprises and larger employers can expect to pay more FUTA taxes, though their rate per worker won’t change.

While the initial $7,000 is known as the “FUTA wage base,” SUTA may modify this base. Plus, employers that pay their federal and state unemployment taxes in full may have the opportunity to earn a tax credit worth up to 5.4% of their FUTA taxable wages. This credit may reduce a company’s FUTA tax burden to just 0.6%.

When states lack funds for unemployment benefits, they can take Federal Unemployment Trust Fund loans. However, if a state has outstanding loans for two consecutive years and doesn’t repay the full amount by Nov. 10 of the second year, its FUTA credit rate for employers will be reduced until the loan is repaid.

SECA tax

The SECA tax applies to individuals who are self-employed and do not work for an employer. SECA requires self-employed people to cover both the employee and employer portion of the FICA tax. This helps ensure the same coverage under social insurance programs, like Medicare and Social Security, once a self-employed person reaches retirement.

Since self-employed taxpayers are defined as both the employee and employer, they are taxed at a rate of 12.4% (6.2% + 6.2%). Their earnings are capped at $184,500 in 2026 — just like FICA. Any gross wages above this amount are not subject to Social Security tax.

The Medicare tax rate is 2.9%, but there is no income cap for Medicare. This brings the total tax rate to 15.3% for self-employed workers.

State-mandated taxes

Some states levy payroll taxes to help finance employee programs and benefits. The rates and requirements vary by state.

Paid family and medical leave

While the federal Family and Medical Leave Act (FMLA) allows workers to take unpaid leave, it doesn’t provide pay during that time. Some states have enacted their own paid leave programs to help fill that gap. The tax rates associated with these programs differ.

Employment training

California’s Employee Training Tax (ETT) is paid by employers to fund workforce development programs in specific industries. The tax is aimed at building a more competitive and productive workforce. The ETT rate for 2026 is 0.1%.

Disability

A handful of states have enacted disability insurance programs to provide financial assistance to employees who are unable to work due to illnesses or injuries unrelated to their jobs. The program details and rates vary by state.

FAQ

Do employers have to match FICA rates?

Yes. FICA combines Social Security and Medicare taxes for a total of 15.3%, but the cost is split between the employer and employee. 6.2% of an employee’s FICA taxable wages go to Social Security tax and 1.45% of their FICA taxable wages go to Medicare tax. The employer must match these percentages for a grand total of 15.3%.

Which taxes are included in FICA?

FICA taxes include old-age, survivors and disability insurance taxes (Social Security) and hospital insurance taxes (Medicare).

Is Social Security the same as FICA?

No. FICA generates money for Social Security and Medicare programs through taxes imposed on nearly every employee and employer in the United States.

What is the difference between FICA tax and federal tax?

FICA taxes only apply to earned income, including salaries, wages, bonuses, tips, commissions and taxable fringe benefits. Federal income tax applies to earned and unearned income, which includes taxable interest, ordinary dividends and capital gain distributions.

What are the FICA requirements?

FICA requires employers to withhold 6.2% Social Security tax and 1.45% Medicare tax from an employee’s FICA taxable wages. Employers must match the FICA taxes paid by their employees for a total FICA contribution of 15.3%.

Is Medicare the same as FICA?

No. FICA generates money for Medicare and Social Security programs through taxes imposed on nearly every employee and employer in the United States.

Is there an income limit on FICA taxes?

Social Security limits the amount of income subject to taxation. For 2026, that limit is $184,500. There is no cap for Medicare taxes.

Is FICA applicable to self-employed individuals?

The Self-Employment Contributions Act (SECA) tax applies to individuals who are self-employed and do not work for an employer. SECA requires self-employed people to cover both the employee and employer portion of the FICA tax.

Is FICA different from income tax?

Yes. FICA taxes are payroll taxes that fund Social Security and Medicare, while income taxes apply to an individual’s or business’s income. FICA taxes are withheld from employee wages, while income taxes are reported on an individual’s tax return.

Why do I have to pay FICA tax?

FICA is a mandatory tax that funds Social Security and Medicare. Paying FICA taxes earns you credits toward your Social Security coverage.

Is FICA tax deductible?

The employer portion of FICA is tax deductible. The employee portion is not.

Are FICA taxes mandatory?

Yes. Nearly every employer is required to withhold FICA taxes from employees’ wages.

Has the Social Security wage limit changed for 2026?

Yes, the current Social Security taxable wage limit has risen to $184,500 per year in 2026, up from the 2025 limit of $176,100.

Do high-income employees pay more FICA tax in 2026?

Technically, yes, they could, if they make over $184,500. Additionally, self-employed individuals and high earners who make more than $200,000 (or $250,000 if married filing jointly) pay an additional Medicare tax rate of 0.9% with no taxable wage limit.

How does FICA affect retirement contributions?

Typically, FICA taxes are withheld before retirement contributions are deducted, so they’re pulled from an employee’s gross pay. However, FICA taxes generally don’t apply to these benefits as they’re being paid out to a recipient.

Explore Paycom’s payroll tax software to learn how we alleviate the administrative burden of managing payroll taxes.