Federal Insurance Contributions Act (FICA)

What is Federal Insurance Contributions Act (FICA)?

The Federal Insurance Contributions Act (FICA) is a US law that requires both employees and employers to contribute a percentage of wages toward Social Security and Medicare programmes. These contributions are automatically deducted from employee paychecks and matched by the employer.

Why Federal Insurance Contributions Act (FICA) Matters

The current FICA tax rate is split between Social Security and Medicare, with each party paying a combined rate on eligible earnings. Social Security tax applies up to an annual wage cap, while Medicare tax has no income limit and includes an additional surcharge for high earners. Employers are responsible for calculating, withholding, and remitting FICA taxes accurately each pay period.