FICA (Federal Insurance Contributions Act)
Definition
The payroll taxes that fund Social Security and Medicare. Employees pay 7.65% of their wages (6.2% for Social Security on the first $176,100 of earnings in 2025, plus 1.45% for Medicare on all earnings). Employers match this amount. Self-employed individuals pay both portions (15.3%) through self-employment tax. An additional 0.9% Medicare surtax applies to earnings above $200,000 (single) or $250,000 (married filing jointly).
Example
On a $60,000 salary, you'd pay $4,590 in FICA taxes ($3,720 Social Security + $870 Medicare). Your employer pays the same amount.