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What is FICA?

FICA, which stands for the Federal Insurance Contribution Act, is a tax which impacts employees, employers, and self-employed individuals. 


The tax for social security benefits began in 1935, and it now covers retirement benefits, benefits to workers' survivors, and disability benefits. The Medicare tax was added in 1965, helping to pay for medical coverage primarily for those aged 65 and older. 


Here's how to calculate your FICA rate


Employers


For 2018, the FICA tax rate for employers is 7.65%—6.2% for OASDI and 1.45% for Hospital Insurance. There is no additional Medicare tax on an employer.


Employees


For 2018, an employee will pay:


a. 6.2% Social Security tax on the first $128,700 of wages (maximum tax is $7,960.80 [6.2% of $128,400]), plus

b. 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus

c. 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return).


Both employee and employer contribute to FICA, but employers are responsible for the entire tax.


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