What Income Is Exempt From FICA Taxes?
Not all income is subject to Social Security and Medicare taxes. Understand the specific circumstances and criteria that exempt certain wages from FICA.
The Federal Insurance Contributions Act (FICA) mandates a payroll tax that funds two federal programs: Social Security and Medicare. Social Security provides retirement, disability, and survivor benefits, while Medicare covers hospital insurance for older Americans. For 2025, the tax rate for Social Security is 6.2% for both the employee and the employer, and the Medicare tax rate is 1.45% for both parties.
The Social Security portion of the tax applies only up to an annual income limit, known as the wage base, which is $176,100 for 2025. In contrast, the Medicare tax has no income limit. An Additional Medicare Tax of 0.9% also applies to employee wages over certain thresholds: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. This additional tax is paid only by the employee.
Exemptions Based on Employment Type
One common exemption involves students who work at the school, college, or university they attend. If the student is enrolled and regularly attending classes, the services they perform for that institution are not subject to FICA taxes. This exemption applies to students whose employment is secondary to their educational pursuits.
When a child under 18 is employed by their parent’s business, their wages are not subject to FICA taxes. This rule applies if the business is a sole proprietorship or a partnership in which each partner is a parent of the child. The work performed must be for the parent’s trade or business for the exemption to be valid.
Payments to election workers for services in state, county, or municipal elections are exempt from FICA taxes if their annual pay is below a specific threshold set by the IRS. For example, the threshold was $2,300 in 2024.
Individuals under 18 who deliver or distribute newspapers or shopping news are exempt from FICA taxes. This applies to the direct delivery of papers to consumers and does not cover other services like writing articles or managing distribution.
Exemptions for Non-U.S. Citizens
The FICA tax system has exemptions for certain non-U.S. citizens who are in the United States temporarily. These exemptions are tied to their visa status. They are designed to prevent individuals who do not intend to retire in the U.S. from paying into its social insurance systems.
A significant exemption applies to non-resident alien students, scholars, teachers, researchers, and other exchange visitors. Individuals in the U.S. under F-1, J-1, M-1, or Q-1 visas are not subject to FICA taxes on wages for services that carry out their visa’s purpose. This is contingent on the individual maintaining non-resident alien status for U.S. income tax purposes.
Wages paid to employees of a foreign government performing services in their official capacity are exempt from FICA taxes. This exemption also extends to their accompanying family members and private servants. Similarly, compensation for services performed in the U.S. for a designated international organization, such as the United Nations or the World Bank, is exempt from FICA taxes.
Exemptions for Specific Types of Payments
Certain payments are excluded from FICA taxes based on the nature of the payment itself, rather than the employee’s status. For example, payments an employee receives from a workers’ compensation fund for a work-related injury or sickness are not considered wages and are exempt from FICA.
Reimbursements for business expenses under an accountable plan are not subject to FICA taxes. An accountable plan must have a business connection for the expenses, require substantiation from the employee, and mandate the return of any excess reimbursement. Because these payments are considered repayments of business costs incurred by the employee, they are not treated as wages.
Certain non-cash fringe benefits are excluded from FICA taxes. These include employer contributions to qualified health plans and “de minimis” benefits, which are items of such small value that accounting for them is impractical.
Wages paid to a deceased employee’s beneficiary or estate in the calendar year after the employee’s death are exempt from FICA taxes. However, these payments are still subject to federal income tax.
Religious and Conscience-Based Exemptions
The tax code provides FICA tax exemptions based on religious principles for individuals who meet specific requirements. These exemptions are not automatic and require a formal application with the IRS. They are available to members of certain religious groups and clergy who are conscientiously opposed to public insurance.
An exemption exists for members of a recognized religious sect that is conscientiously opposed to accepting benefits from public or private insurance, including Social Security and Medicare. To qualify, the individual must be a member of and adhere to the sect’s tenets. They must file IRS Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits.
A separate exemption is available for ministers, members of religious orders who have not taken a vow of poverty, and Christian Science practitioners. These individuals can obtain an exemption from self-employment taxes, which include the FICA equivalent, on their ministerial earnings. To do so, they must file IRS Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners.