Federal Insurance Contributions Act (FICA): What Does It Mean?

FICA — Federal Insurance Contributions Act — is the federal law that mandates payroll tax contributions to fund Social Security and Medicare. Employees and employers each pay 6.2% for Social Security (on income up to the annual wage base) and 1.45% for Medicare, for a combined rate of 15.3%. Self-employed individuals pay the full 15.3% themselves, though they can deduct half as a business expense. FICA taxes are automatically withheld from each paycheck and are separate from federal and state income taxes.