What is FICA tax?

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    StellarFi
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    StellarFi
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    The Federal Insurance Contributions Act tax is a payroll tax. Employers are legally required to withhold a certain percentage of the employee’s income for Social Security and Medicare. The total is split between the employer and the employee. You need to pay the FICA tax whether you are self-employed or work for someone else. The FICA taxes are around 15.3% of your earnings. If you’re working for someone else, you pay 7.65%, including 6.2% Social Security tax and 1.45% Medicare tax.

    The Social Security tax could appear as old-age, survivors, and disability insurance (OASDI) tax. Your Social Security number helps record how much you have paid.

    As a self-employed person, you’ll be responsible for paying the entire 15.3%. You may need to file estimated quarterly taxes instead of withholdings because you don’t get a paycheck traditionally. But you can deduct half of this amount in self-employment taxes while filing your return. In 2023, the first $160,200 of your earnings are subject to the Social Security tax while in 2024, the first $168,600 is subject to tax. There is an additional 0.9% surtax above the 1.45% Medicare tax for both years for those single filers earning over $200,000 or joint filers earning $250,000.

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StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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