Social Security & Medicare Taxes (FICA Taxes)
In the U.S., Social Security and Medicare taxes (collectively called FICA taxes, or Federal Insurance Contributions Act taxes) are payroll taxes that fund federal benefits programs. They are automatically withheld from your paycheck.
1. Social Security Tax
- Rate: 6.2% (employee) + 6.2% (employer) = 12.4% total.
- Wage Limit (2024): $168,600 (only income up to this amount is taxed).
- Purpose: Funds retirement, disability, and survivor benefits.
2. Medicare Tax
- Rate: 1.45% (employee) + 1.45% (employer) = 2.9% total.
- No wage limit (all earned income is taxed).
- Additional Medicare Tax (for high earners):
- 0.9% extra on wages above:
- $200,000 (Single)
- $250,000 (Married Filing Jointly)
- $125,000 (Married Filing Separately)
- 0.9% extra on wages above:
- Purpose: Funds healthcare for seniors (Medicare program).
Who Pays FICA Taxes?
- Employees: Split with employer (7.65% total: 6.2% Social Security + 1.45% Medicare).
- Self-Employed: Pay the full 15.3% (called Self-Employment Tax, covers both halves).
- Exemptions:
- F-1/J-1 students (first 5 years) are exempt from Social Security & Medicare taxes.
- H-1B, L-1, and other work visa holders must pay FICA taxes.
How It Works in Your Paycheck
- If you earn $60,000/year:
- Social Security: $60,000 × 6.2% = $3,720 (you pay) + $3,720 (employer pays).
- Medicare: $60,000 × 1.45% = $870 (you pay) + $870 (employer pays).
- Total FICA deduction: $4,590/year from your salary.
Key Differences from Income Tax
| Feature | FICA Taxes | Federal Income Tax | |——————|————|——————–| | Withheld From | Paycheck | Paycheck | | Rate | Fixed % | Progressive (10%-37%) | | Wage Limit | Yes (Social Security) | No (all income taxed) | | Purpose | Funds Social Security/Medicare | General U.S. budget |
What If Too Much Was Withheld?
- If you’re exempt (e.g., F-1 student) but your employer withheld FICA:
- Request a refund using Form 843.
- If you overpaid Social Security (e.g., switched jobs and exceeded $168,600):
- Claim a credit on your tax return.
Why It Matters
- These taxes fund critical safety-net programs.
- H-1B workers: Pay into Social Security, making them eligible for future benefits (if they work 10+ years).
- F-1 OPT students: Should confirm they’re not wrongly charged FICA in their first 5 years.
Tax Tip: Check your pay stubs to ensure correct FICA withholding!