FICA Tax BasicsFICA Tax Basics

FICA tax is short for Federal Insurance Contributions Act tax. It makes up part of your W-2 employee withholdings on your paystubs. But what is this withholding for? In this article, we will go over the basics of FICA tax.

The Use

The use of your FICA tax withholdings is twofold. This tax funds both the Social Security and Medicare programs. Without paying this tax you will not qualify for any type of social security benefits, including disability and life insurance. Life insurance benefits are funds that are paid to your qualifying dependents if you pass.


Your FICA tax is split 50/50 between you and your employer. Everyone pays at the same preset rates. Each paycheck you receive you will pay 6.2% for Social Security and 1.45% for Medicare. Your employer will be responsible to pay the same total 7.65%. However, if you are self-employed, you will be solely responsible for the full 15.3%. The amounts withheld are paid to the federal government each time you receive a paycheck.

When FICA Tax Is Not Due

There are specific times when FICA tax is not due. First, if you make over $142,800 in 2021 you do not have to pay FICA on the money you make over that amount. Additionally, some employment payments you receive are not subject to FICA. These include:

  • A child under 18 who is employed by their parents.
  • Qualified retirement plan contributions made by the employer.
  • A student that is an employee of their school, university, or college.
  • If wages come from a church or church-controlled organization.
  • Employees of certain state and local government authorities.

FICA Tax and Your Paycheck

FICA tax is not something that most employees can avoid. But it has advantages, such as allowing you to qualify for Social Security and Medicare benefits. It is important to note that these taxes are separate from the federal income tax you pay. If you end up owing the IRS each year, your federal withholdings are what you may need to look at. A qualified tax professional can help you choose the best withholding rate for your situation.

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