Social Security and Medicare Taxes on Your Paycheck

What Is FICA? The Statutory Framework

FICA stands for the Federal Insurance Contributions Act, a federal law mandating payroll deductions to fund two critical social insurance programs: Social Security (Old-Age, Survivors, and Disability Insurance, or OASDI) and Medicare (Hospital Insurance, or HI).

Unlike federal income tax, which varies based on your W-4 deductions and tax credits, FICA taxes are calculated at strict statutory flat rates on covered wages.

Social Security Tax: Rates and the 2026 Wage Base Cap

Social Security tax is levied at 6.20% on employee wages, which is matched by a 6.20% contribution from your employer (totaling 12.40%).

However, Social Security tax does not apply to infinite earnings. Congress established an annual maximum taxable wage base that adjusts automatically for national average wage inflation.

For calendar year 2026, the Social Security wage base is $184,500. This means the maximum Social Security tax an employee will have withheld in 2026 is exactly $11,439.00 ($184,500 × 0.062). Once your year-to-date cumulative earnings reach $184,500, Social Security withholding immediately stops for the remainder of the calendar year, increasing your take-home pay on subsequent paychecks.

Medicare Tax and the 0.9% Additional Medicare Surtax

Regular Medicare tax is 1.45% of gross wages, matched by 1.45% from the employer (totaling 2.90%). Unlike Social Security, regular Medicare has no wage ceiling; every dollar earned is subject to the 1.45% tax.

Under the Internal Revenue Code (Section 3101(b)), high earners are also subject to an Additional Medicare Tax of 0.9%. It is critical to distinguish between the employer payroll withholding rule and the taxpayer’s final tax liability thresholds:

Additional Medicare Employer Withholding Rule: An employer is legally obligated to begin withholding the 0.9% Additional Medicare Tax in the pay period in which wages paid to the employee by that employer exceed $200,000 in a calendar year, regardless of the employee’s filing status or marital status. Employers do not combine wages paid by other employers or factor in a spouse’s income.

Taxpayer Final Tax Liability Rule: When you file your annual federal income tax return (IRS Form 8959), your actual 0.9% Additional Medicare Tax liability is calculated based on your total combined household earned income and filing status thresholds: $250,000 for Married Filing Jointly, $125,000 for Married Filing Separately, and $200,000 for Single and Head of Household filers. Any discrepancy between the amount withheld by your employer(s) and your final obligation is reconciled on IRS Form 1040.

What Wages Are Exempt from FICA?

Not all payroll deductions reduce your FICA taxable wages. Qualifying Section 125 cafeteria-plan benefits—such as employer-sponsored medical, dental, and vision insurance premiums, as well as Flexible Spending Account (FSA) contributions—are exempt from both Social Security and Medicare taxes.

Crucially, employee HSA contributions made through a Section 125 cafeteria-plan salary reduction may be excluded from federal income tax withholding, Social Security, and Medicare taxes. In contrast, ordinary employee payroll deductions outside a qualifying Section 125 cafeteria plan are generally included in wages for federal withholding and FICA purposes (and California does not conform to the federal HSA tax exclusion for state PIT).

In contrast, retirement contributions to traditional 401(k) or 403(b) accounts reduce federal and state income taxes, but they remain 100% subject to FICA taxes.