FICA: The Tax That Costs Low Earners More Than Income Tax
FICA is the line on your pay stub that funds Social Security and Medicare. It is not income tax, it follows completely different rules, and for a large share of American workers it is the larger of the two deductions.
The reason is structural. Income tax has a standard deduction that shields the first $16,100 and graduated brackets that start at 10%. FICA has neither. It applies to the first dollar you earn, at a flat rate.
The two components
| Component | Employee rate | Applies to | Employer pays |
|---|---|---|---|
| Social Security (OASDI) | 6.20% | First $184,500 of wages | Matches, 6.2% |
| Medicare | 1.45% | All wages, no cap | Matches, 1.45% |
| Additional Medicare | 0.90% | Wages above $200,000 | None |
Where FICA outweighs income tax
Comparing the two deductions across wage levels, in a state with no income tax so the comparison is clean:
| Wage | Gross | FICA | Federal income tax | Larger deduction |
|---|---|---|---|---|
| $15/hr | $31,200 | $2,387 | $1,564 | FICA |
| $20/hr | $41,600 | $3,182 | $2,812 | FICA |
| $30/hr | $62,400 | $4,774 | $5,308 | Income tax |
| $50/hr | $104,000 | $7,956 | $14,050 | Income tax |
| $100/hr | $208,000 | $14,527 | $38,654 | Income tax |
| $150/hr | $312,000 | $16,971 | $72,334 | Income tax |
At the lower end FICA dominates, and by a wide margin. This is the part of the tax system that hits working-class earners hardest, and it is invisible in most discussions of “who pays tax,” which usually mean income tax only.
The Social Security cap creates an odd curve
Social Security stops at $184,500 of wages in 2026. Above that, the 6.2% simply stops — the maximum any employee pays into Social Security this year is $11,439.
This produces something counterintuitive: as income crosses the cap, your effective tax rate can briefly fall. Someone earning $369,000 pays the same Social Security tax as someone earning $184,500, so the second earner's FICA burden as a share of income is half as large.
Medicare has no such cap and adds a further 0.90% above $200,000, which partly offsets the effect at high incomes.
The half you never see
Your employer pays a matching 7.65% on your wages. It does not appear on your pay stub, but most economists treat it as part of your compensation — money your employer spends on you that you never receive.
This matters concretely if you are self-employed or contracting. You pay both halves as self-employment tax: 15.3% rather than 7.65%. A contractor rate that merely matches an employee salary is a substantial pay cut once that is accounted for. We cover the full self-employed picture separately.
What FICA does not do
Pre-tax deductions do not all work the same way against FICA. Traditional 401(k) contributions reduce your income tax but not your Social Security and Medicare wages — you still pay FICA on money you put into retirement. HSA contributions made through an employer cafeteria plan generally do escape FICA, which makes them unusually efficient.
Note that this calculator applies pre-tax deductions before FICA for simplicity, so a 401(k)-heavy scenario will show slightly less FICA than a real pay stub would.
To see the FICA line against your own wage and state, run it through the calculator.