What is the FICA tax?

If you are an employee on a U.S. payroll, one of the taxes you will see subtracted from your gross pay will be the FICA tax, which is a combination of Social Security and Medicare taxes.

Learn what FICA is, why you have to pay it, and the differences between FICA and income taxes.

What is the FICA tax?

The FICA tax (Federal Insurance Contributions Law), also commonly called payroll tax or withholding at source, is money that is charged to you and your employer to pay for services such as old-age, survivors and disability insurance (OASDI) . It also covers Medicare.

  • Alternative name : withholding or payroll tax
  • Acronym : FICA

As an employee, your total amount of FICA taxes due for 2020 is 6.2% of your gross pay for Social Security and 1.45% of your gross pay for Medicare, for a total of 7.65%.

While Social Security taxes are capped based on your earnings ($ 137,700 for 2020), Medicare tax actually increases by 0.9% if you earn more than a certain amount in a calendar year.For single taxpayers, that threshold is $ 200,000; For those who are married filing jointly, the threshold is $ 250,000.

Your employer will automatically withhold these taxes for you. It will also match your contributions to the FICA tax, resulting in a total of 15.3% of the FICA tax paid per employee each year.

Although independent contractors are not subject to the FICA tax, they are subject to the self-employment tax, which is similar to the FICA tax in that it covers Social Security and Medicare taxes. The total tax owed by independent contractors is 15.3% total each year.

The total amount of taxes owed for all workers is 15.3% of gross earnings for 2020, although most people will only see 7.65% of that deducted from their checks because their employer pays the rest.

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