Social Security and FICA in the United States
The United States operates a federal social insurance system funded through the Federal Insurance Contributions Act (FICA). Both employees and employers contribute 7.65% each (total 15.3%) on wages, funding Social Security and Medicare programs.
FICA Contribution Rates (2026)
Employee Contributions (7.65% Total)
- Social Security (OASDI): 6.2% on wages up to $176,100 (wage base indexed annually)
- Medicare (HI): 1.45% on all wages (no cap)
- Additional Medicare: 0.9% on wages over $200,000 (single) / $250,000 (MFJ)
Employer Contributions (7.65% Total)
- Social Security (OASDI): 6.2% on wages up to $176,100
- Medicare (HI): 1.45% on all wages (no cap)
- Employers do not pay the Additional Medicare Tax
Self-Employment Tax
Self-employed individuals pay both the employee and employer portions: 15.3% total (12.4% Social Security on net earnings up to $176,100 + 2.9% Medicare on all net earnings). The employer-equivalent portion (7.65%) is deductible as an adjustment to income. Additional Medicare Tax of 0.9% applies to self-employment income over $200,000/$250,000.
Social Security Benefits
Social Security provides retirement, disability, and survivor benefits:
- Retirement Age: Full retirement age is 67 (for those born after 1960), early retirement available at 62 with reduced benefits
- Benefit Calculation: Based on highest 35 years of indexed earnings (Primary Insurance Amount formula)
- Maximum Benefit: Approximately $4,018/month at full retirement age (2026)
- Cost of Living Adjustment (COLA): Annual inflation adjustment
Medicare Benefits
Medicare provides health insurance for individuals 65 and older and certain younger individuals with disabilities:
- Part A: Hospital insurance (premium-free for most)
- Part B: Medical insurance (monthly premium, income-adjusted)
- Part D: Prescription drug coverage
- IRMAA (Income Related Monthly Adjustment Amount) applies to higher-income beneficiaries
Registration and Compliance
- Employer Identification Number (EIN): Required for all employers
- Form W-2: Annual wage and tax statement to employees
- Form 941: Quarterly employment tax return
- Form 940: Annual Federal Unemployment (FUTA) tax return
- Deposits: Semi-weekly or monthly deposit schedule based on tax liability
Self-Employed Compliance
- Schedule SE: Used to calculate self-employment tax
- Estimated Tax Payments: Quarterly, including SE tax
- Deduction: Half of SE tax is deductible on Form 1040