The Federal Insurance Contribution Act, or FICA, is a federal program funded through tax payments. Your contribution pays for benefits other citizens receive from the fund. You also earn credits from the taxes you pay in, which helps make you or your dependents eligible for future program payments. FICA is divided into two categories, Social Security and Medicare. The difference between FICA and FICA-Med is that one deduction goes toward the program's cash benefits fund, and the other goes toward its medical benefits fund.FICA Social Security Deduction
FICA Social Security Deduction
The FICA deduction on your paycheck funds the Social Security portion of the program. Social Security taxes are composed of three parts: old-age, survivors, and disability insurance. You pay half of your Social Security taxes through a mandatory payroll deduction, and your employer pays the other half. These taxes pay Social Security benefits to retirees, supplemental Social Security Income payments to low-income disabled citizens and any benefits due to eligible survivors.
FICA Medicare Deduction
The FICA Medicare deduction is just for Medicare tax. Similar to Social Security taxes, you pay half from your wages and your employer pays the rest. Taxes collected for Medicare taxes fund the health care program for retired and elderly citizens. This paycheck deduction is also mandatory, even if you don't anticipate getting Medicare yourself.
Total Percentage FICA Deduction
All FICA taxes are based on gross earnings before any other deductions or taxes are subtracted. The combined amount of FICA taxes due per taxpayer is 15.3 percent, consisting of 12.4 percent Social Security taxes and 2.9 percent Medicare taxes. As a worker, you split responsibility for these taxes with your employer. Thus, your deduction will be 6.2 percent for Social Security taxes and 1.45 percent for Medicare taxes, for a total of 7.65 percent. If you're self-employed, you are considered both employer and employee, meaning you're liable for the entire 15.3 percent.
FICA Contribution Limits
Social Security taxes are subject to maximum wage limits each year. As of 2018, the maximum was $128,400. No Social Security taxes are collected on earnings over that limit. Medicare taxes have no wage base limits, so you'll always have Medicare taxes deducted. However, if you earn more than $200,000 per year — or $250,000 if you are married and filing jointly — your employer will deduct an extra 0.9 percent Medicare tax on wages over this amount. This raises the total FICA deduction for high earners to 8.55 percent.