FICA Tax — Smart Financial Analysis

📚 Official Sources

📖 How FICA Taxes Work

FICA consists of Social Security (6.2% employee + 6.2% employer) and Medicare (1.45% + 1.45%). The SS wage base caps the 6.2% at $168,600. Medicare has no cap. Additional Medicare Tax (0.9%) applies only to the employee on income above $200K single / $250K married.

💼 Employee vs Self-Employed

W-2 employees pay 7.65% and employers match. Self-employed pay 15.3% (both portions) but can deduct half on their income tax return. The 92.35% rule applies to self-employment income before calculating SE tax.

📊 Key Thresholds

• • SS Wage Base: $168,600 (2024) — no SS tax above this
• • Additional Medicare: $200,000 single / $250,000 married filing jointly
• • Self-Employment: 92.35% of net profit is taxable for SE tax

❓ Common Questions

📅 When to Use This Calculator

Use this calculator when starting self-employment, receiving raises or bonuses, planning quarterly taxes, comparing job offers, or preparing your tax return. It helps you understand your total FICA obligation and plan for take-home pay.

🎯 Pro Tips

• • Use gross annual income before any deductions for W-2 employees
• • For self-employed, use Schedule SE net earnings (after 92.35% adjustment)
• • Include all forms of earned income: wages, tips, bonuses
• • Filing status matters for Additional Medicare Tax (single: $200K, married: $250K threshold)

⚖️ FICA vs Income Tax

FICA taxes fund specific programs (Social Security, Medicare) and use flat rates. Income taxes fund general government and use progressive brackets. FICA has a wage cap for Social Security; income tax has no cap. Both are withheld from paychecks, but FICA is often the larger tax for middle-income workers.

📋 Self-Employment Tax Deduction

Self-employed individuals can deduct 50% of their self-employment tax on Form 1040. This reduces income tax but not the SE tax itself. The deduction is an above-the-line adjustment, so you can take it even if you don't itemize.