What Is FICA Tax on a W-2 and What Do the Boxes Mean?
Demystify your W-2 by understanding how FICA payroll deductions are calculated and why the wage amounts for income, SS, and Medicare taxes may differ.
The Federal Insurance Contributions Act (FICA) tax is a mandatory U.S. federal payroll tax deducted from employee paychecks to fund Social Security and Medicare. Both employees and employers are responsible for paying FICA taxes, with each contributing an equal share. This tax ensures funds are available for retirement, disability, and survivor benefits, as well as hospital insurance for older Americans and those with certain disabilities.
The Components of FICA Tax
FICA tax is composed of two separate taxes: Social Security and Medicare. For employees, the Social Security tax rate is 6.2% and only applies to earnings up to a specific annual limit. This threshold, the wage base limit, is adjusted for inflation and is set at $176,100 for 2025. Once your year-to-date earnings exceed this amount, your employer will no longer withhold the Social Security tax for the rest of the year.
The second component is the Medicare tax, which has an employee rate of 1.45%. Unlike the Social Security tax, there is no wage limit for Medicare tax; it applies to all of your covered earnings. This portion of FICA funds hospital insurance (Medicare Part A) for individuals aged 65 and older and for those with qualifying disabilities.
For higher earners, there is an Additional Medicare Tax. This requires individuals to pay an extra 0.9% on earnings that exceed certain thresholds based on their tax filing status. The income thresholds are $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married individuals filing separately. Employers are required to begin withholding this tax once an employee’s wages surpass $200,000 in a calendar year, regardless of filing status.
Locating FICA on Your W-2
Your annual Form W-2, Wage and Tax Statement, provides a summary of your earnings and tax withholdings, including your FICA contributions. To find these amounts, you will need to look at four specific boxes on the form.
Box 3, “Social Security wages,” shows the portion of your income subject to the Social Security tax. Due to the annual wage base limit, this amount will not be higher than the cap for that tax year. Box 4, “Social Security tax withheld,” reports the total Social Security tax paid, which should be the amount in Box 3 multiplied by the 6.2% employee tax rate.
Box 5, “Medicare wages and tips,” displays all earnings subject to the Medicare tax. Because there is no wage limit for Medicare, the amount in Box 5 can be higher than the amount in Box 3. Box 6, “Medicare tax withheld,” shows the total Medicare tax paid. This amount is calculated by multiplying the wages in Box 5 by the 1.45% employee rate, plus any Additional Medicare Tax withheld.
Understanding Differences in W-2 Wage Boxes
When reviewing a W-2, the wage amount in Box 1, “Wages, tips, other compensation,” may differ from the amounts in Box 3 and Box 5. The reason for this discrepancy is how pre-tax deductions are treated for different tax purposes. Box 1 reports your wages subject to federal income tax.
Certain deductions from your paycheck reduce your taxable income for federal income tax purposes but not for FICA tax purposes. Examples are employee contributions to retirement plans like a 401(k) or 457 plan. These contributions are subtracted from your gross pay before federal income tax is calculated, lowering the figure in Box 1 but not the wages subject to FICA taxes in Boxes 3 and 5.
Other pre-tax deductions, such as payments for health insurance premiums or contributions to a Health Savings Account (HSA), reduce the wage amounts for all three tax types. Therefore, the difference between Box 1 and Boxes 3 and 5 is most often attributable to your pre-tax retirement savings.
Handling Excess Social Security Withholding
It is possible to have too much Social Security tax withheld over a year. This situation occurs when an individual works for two or more employers and their combined income exceeds the annual Social Security wage base limit. Each employer is required to withhold Social Security tax up to the limit, regardless of what another employer has withheld.
To determine if you have overpaid, add the amounts shown in Box 4 of all your W-2 forms for the year. If the total exceeds the maximum possible Social Security tax for 2025 ($10,918.20), you have an overpayment.
The procedure for getting a refund depends on whether the overpayment was from a single employer or multiple employers. If one employer mistakenly withheld more than the annual maximum, you must first contact that employer and request a refund. If the employer is unable to make the adjustment, you can file Form 843, Claim for Refund and Request for Abatement, with the IRS.
If the overpayment occurred because you worked for more than one employer, the process is different. You can claim the excess amount as a credit against your federal income tax when you file your annual Form 1040 tax return. The excess amount is reported on Schedule 3, Additional Credits and Payments.