Is FICA Tax Deductible on Your Income Taxes?

The Federal Insurance Contributions Act (FICA) mandates a payroll tax that funds two separate federal programs: Social Security and Medicare. For most workers, this tax appears as a standard deduction on every paycheck. The total FICA tax rate is 15.3% of earnings, but this cost is split evenly between employees and their employers. An employee pays 7.65%, composed of a 6.2% Social Security tax and a 1.45% Medicare tax, and employers match this contribution. Whether these payments can be deducted from your income taxes depends entirely on who is paying the tax.

The Rule for Employees

For individuals who receive a W-2, their portion of FICA taxes is not deductible on their personal income tax return. The Internal Revenue Service (IRS) considers these taxes personal expenses, not an expense incurred in the course of generating income.

The 6.2% Social Security portion applies only up to an annual wage limit, which for 2025 is $176,100. In contrast, the 1.45% Medicare tax has no income cap. High-income earners may also be subject to an Additional Medicare Tax of 0.9% on earnings over certain thresholds, which is also not deductible.

The Rule for Employers

The matching 7.65% portion of FICA taxes an employer pays on behalf of its employees is a deductible business expense. This is because the employer’s contribution is classified as an ordinary and necessary cost of conducting business, associated with employee compensation.

This tax treatment allows businesses to lower their taxable income. For example, for an employee earning $100,000, the employer contributes $7,650 in FICA taxes and can deduct that full amount on its business tax return.

The Deduction for Self-Employed Individuals

Self-employed individuals, such as independent contractors and sole proprietors, are responsible for paying the entire 15.3% FICA equivalent, known as the self-employment (SE) tax. This is because they are considered both the employee and the employer. The SE tax combines the 12.4% for Social Security and the 2.9% for Medicare.

These individuals can deduct one-half of their total SE tax paid. This deduction is not an itemized deduction but an “above-the-line” adjustment to income taken on Schedule 1 of Form 1040. This means the deduction lowers the individual’s Adjusted Gross Income (AGI) and is available regardless of whether the taxpayer itemizes or takes the standard deduction.

The logic behind this deduction is to create tax parity with traditional employment. In a traditional arrangement, the employer gets to deduct their half of the FICA payment. Allowing a self-employed person to deduct one-half of their SE tax simulates this employer-side deduction. The calculation is performed on Schedule SE, which is filed with the individual’s Form 1040.