US money guide
FICA: the 7.65% nobody explains
Look at your paystub and you'll find two lines that aren't income tax and aren't optional. Together they take 7.65% of everything you earn, and most people have never had them explained.
The two halves
- Social Security — 6.2%, on wages up to $184,500 in 2026. Above that, it stops.
- Medicare — 1.45%, on everything, with no ceiling. High earners pay an extra 0.9% above $200,000 (single) or $250,000 (married filing jointly).
Your employer pays the same again on your behalf. So the true cost of employing you is about 7.65% more than your salary — worth remembering when you negotiate, and central to why contract rates need to be higher.
Why your paycheck sometimes grows in autumn
If you earn above the Social Security wage base, that 6.2% simply stops once you cross it — so a high earner's take-home jumps late in the year, then drops again every January. Nothing is wrong; you've just maxed out that portion.
See your full paycheck breakdown →Federal, FICA, state and 401(k), by state.Your 401(k) doesn't help here
This catches people out. Traditional 401(k) contributions reduce your income tax, but FICA is calculated on gross wages before those deductions. Contributing 15% doesn't reduce your Social Security or Medicare by a cent.
The exceptions are certain pre-tax benefits under a Section 125 plan — health insurance premiums, FSA and HSA contributions — which do reduce FICA. That makes an HSA unusually efficient: it dodges income tax, FICA, and tax on growth and qualified withdrawals.
What you get for it
It isn't a tax in the pure sense — it buys entitlement. Your Social Security benefit is based on your 35 highest-earning years, and you need 40 credits (about ten years of work) to qualify at all. Medicare eligibility at 65 works similarly.
Worth doing once a year: create an account at ssa.gov and check your earnings record. Errors happen, and they're far easier to fix now than at 67.
Quick answers
What is FICA on my paycheck?
FICA is Social Security (6.2%) plus Medicare (1.45%) — 7.65% of your wages, matched by your employer. It funds Social Security and Medicare benefits.
Is there a cap on FICA?
Social Security stops at the annual wage base ($184,500 in 2026). Medicare has no cap, and high earners pay an extra 0.9% above $200,000 single or $250,000 married filing jointly.
Can I opt out of FICA?
No, not for ordinary employment. Some limited exceptions exist for certain religious groups, students employed by their school, and some non-resident visa holders.
Does a 401(k) reduce FICA?
No. Traditional 401(k) contributions reduce income tax but not Social Security or Medicare — those are taken on gross wages.
Written in plain English by mytakehome.money. General information, not financial advice — check anything important at gov.uk or with a qualified adviser.