FICA Payroll Tax

About FICA Payroll Tax

FICA, the Federal Insurance Contributions Act tax, funds Social Security and Medicare. The Social Security portion is 12.4 percent on wages up to an annual cap, split equally between employer and employee. The Medicare portion is 2.9 percent on all wages, with no cap. High earners pay an additional 0.9 percent Medicare surtax. The FICA tax is the largest tax paid by most American workers. For approximately 70 percent of households, FICA is larger than the income tax. The payroll tax is regressive because the Social Security wage cap means high earners pay a lower percentage of total income. The wage cap was 168,600 in 2024. Social Security trust funds are projected to be depleted by 2035, requiring either benefit cuts or tax increases.