What Is FICA, Exactly?

FICA stands for the Federal Insurance Contributions Act—the law that funds Social Security and Medicare. For W-2 employees, it's a flat 7.65% of your gross wages (before tax or retirement deductions) up to a certain limit. Unlike income tax, FICA is the same in every state—no matter where you live or work, you'll see this exact percentage coming out of every paycheck.

The Two Parts of FICA

FICA has two components, each with different rules and limits for 2026:

Social Security: 6.2% (capped at $184,500)The 2026 Social Security wage base is $184,500, meaning only the first $184,500 of your annual wages are subject to the 6.2% Social Security tax. That's $11,439.00 max in employee-side Social Security for 2026. Any amount you earn above $184,500 is exempt from the 6.2% portion.

Medicare: 1.45% (no cap)Medicare tax applies to all wages—there's no upper limit. If you earn $50,000 or $500,000, you'll pay 1.45% of everything toward Medicare. For high earners, there's an additional 0.9% Medicare surtax on income above $200,000 (single) or $250,000 (married filing jointly), bringing the total Medicare rate to 2.35% above those thresholds.

The Social Security Tax Gap: Why High Earners Stop Paying at $184,500

A phrase many searchers use is the “Social Security tax gap”—the slice of a high earner's income that escapes the 6.2% Social Security tax because of the annual wage base cap. In 2026 the cap is $184,500: every dollar you earn above that is free of the Social Security tax (it is still subject to Medicare's 1.45%, and the 0.9% Additional Medicare Tax above $200,000).

For a single filer making $300,000, Social Security tax is withheld only on the first $184,500—so roughly $115,500 of earnings never see the 6.2% tax. That is the practical “gap.” It is also why two workers can have very different take-home percentages even at the same bracket: once you clear the wage base, your effective FICA rate drops from 7.65% to 2.35% (Medicare only). Use our Salary Calculator to see exactly where your own wage base cutoff lands.

Real-World FICA Examples

Run the calculator below to see FICA and all other withholding for your hourly rate in any state. Defaults are set to $35/hr in Ohio to match the first example.

Example 1: $20/Hour Full-Time Worker ($41,600/Year)

This worker earns well below the $184,500 wage base, so all income is subject to both Social Security and Medicare:

Social Security: $41,600 × 6.2% = $2,579.20 per year ($198.40/month)

Medicare: $41,600 × 1.45% = $603.20 per year ($46.40/month)

Total employee FICA: $3,182.40 per year, or $265.20 per paycheck. Your employer pays an identical $3,182.40 on top.

Example 2: $100/Hour Consultant ($208,000/Year)

This worker hits the Social Security cap and triggers the additional Medicare surtax:

Social Security: $184,500 × 6.2% = $11,439.00 (capped—no SS on the remaining $23,500)

Medicare (base): $208,000 × 1.45% = $3,016.00

Additional Medicare: ($208,000 - $200,000) × 0.9% = $72.00

Total employee FICA: $14,527.00. Note how effective FICA drops from 7.65% on the first $184,500 to just 2.35% on income above $200,000.

Employee vs. Self-Employed (1099): The Big Difference

If you're a W-2 employee, your employer splits FICA with you—you pay 7.65%, they pay 7.65%. As a self-employed independent contractor (1099), you must pay both the employee and employer portions: 15.3% on the first $184,500, then 2.9% beyond that (Medicare only, plus 0.9% surtax if applicable).

The IRS calls this the self-employment tax, and it's calculated on Schedule SE of your 1040. The silver lining: you can deduct 50% of your self-employment tax as a business expense on your federal income tax, which recovers roughly 7.65% of your earnings. So the effective self-employment tax rate works out to about 14.2% at the margin—a big difference from the 7.65% that W-2 employees pay.

Are 401(k) Contributions Subject to FICA?

Here's a common point of confusion: your own pre-tax 401(k) contributions are NOT exempt from FICA. They reduce your income tax but not your FICA tax. This is different from some other payroll deductions like HSA contributions or dependent care FSAs, which are FICA-free.

However, employer matching contributions ARE FICA-free. If your employer contributes $2,000 to your 401(k), that amount is not subject to FICA tax for either you or your employer. This makes employer matches even more valuable—they come with a tax-free bonus.

Income That's Exempt From FICA

Several types of income avoid FICA entirely:

• Investment income (interest, dividends, capital gains, rental income for passive landlords)
• Alimony received (per 2018+ tax rules)
• Certain government benefits (workers' compensation, some social services)
• Qualified scholarship and fellowship payments (not compensation for services)
• Employer contributions to health insurance premiums (FICA-free for you)
• State and local tax refunds (not taxable income for federal purposes)