Is FICA and Medicare Tax the Same?
Unravel the structure of your federal payroll contributions. Discover how FICA encompasses Medicare and other vital social insurance programs.
Payroll taxes are common deductions from employee paychecks, funding significant government programs. Among these, the Federal Insurance Contributions Act (FICA) tax often causes confusion, especially regarding its relationship with Medicare tax.
Understanding FICA Tax
FICA stands for the Federal Insurance Contributions Act, a U.S. federal payroll tax. This act mandates contributions from both employees and employers to fund Social Security and Medicare benefits. FICA is not a single tax but an umbrella term encompassing two distinct components: Social Security tax and Medicare tax. When you see FICA deductions on a paycheck, it represents the combined total of these two federal taxes.
The Federal Insurance Contributions Act was established by the 1935 Social Security Act and has been a mandatory payroll tax since then. Both the employee and the employer contribute to FICA, with each paying half of the total FICA tax rate. This shared responsibility ensures that funds are collected to support current and future beneficiaries of Social Security and Medicare.
The Social Security Component
The Social Security component of FICA, formally known as Old-Age, Survivors, and Disability Insurance (OASDI) tax, helps fund retirement, disability, and survivor benefits. For 2025, the Social Security tax rate is 6.2% for employees and is matched by employers, who also pay 6.2%. This results in a combined rate of 12.4% on an employee’s gross wages.
A key aspect of Social Security tax is the annual wage base limit, which is the maximum amount of earnings subject to this tax each year. For 2025, the Social Security wage base limit is $176,100, an increase from $168,600 in 2024. This means any earnings above this threshold are not subject to the Social Security portion of FICA tax.
Self-employed individuals are responsible for paying both the employee and employer portions of the Social Security tax. This combined rate for self-employed individuals is 12.4% of their net earnings, up to the annual wage base limit. They calculate this through the Self-Employment Contributions Act (SECA) tax and can deduct the employer-equivalent portion when figuring their adjusted gross income.
The Medicare Component
The Medicare component of FICA is specifically allocated to fund hospital insurance (Part A) for seniors and certain disabled individuals. For 2025, the Medicare tax rate is 1.45% for employees, matched by employers at 1.45%. This results in a combined Medicare tax rate of 2.9% on an employee’s gross wages.
There is no wage base limit for Medicare taxes, meaning all covered wages are subject to this tax, regardless of how high an individual’s earnings are. This differs significantly from the Social Security tax, which has an annual cap. For high-income earners, an Additional Medicare Tax of 0.9% applies to wages exceeding certain thresholds. These thresholds are $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married individuals filing separately.
Employers are required to withhold this additional 0.9% Medicare tax from wages paid in excess of $200,000 in a calendar year, without regard to the employee’s filing status. There is no employer match for this Additional Medicare Tax. Self-employed individuals also pay the Medicare portion of the self-employment tax at a rate of 2.9% on all net earnings, and the 0.9% Additional Medicare Tax applies to their net earnings above the same income thresholds.