FICA Tax

Payroll taxes for Social Security benefits are collected under the authority of the Federal Insurance Contributions Act, or FICA. Many people simply refer to these taxes as FICA tax. This tax had its origins back in 1935, when the tax was introduced as part of the Social Security program.

What are FICA Taxes?

When the tax provisioning portion of the Social Security Act - Title VIII - was taken out of the program in 1939, it was placed into the Internal Revenue Tax code. At that time, a more descriptive name than Title VIII was needed, so the tax was renamed as the Federal Insurance Contributions Act or simply FICA. To this day, FICA remains the tax collection mechanism for Social Security.

Additional Resources

FICA is used to provide for the federal system of old age, survivors, disability and hospital insurance. The first three of these are funded by the Social Security system, while hospital insurance is funded by a Medicare tax. Both employees and employers are required to contribute to FICA taxes through regular payroll deductions. The good news is the amount of FICA taxes an employee is required to pay is limited.

FICA Tax Rates

Generally, FICA taxes are collected at a rate of 7.65% on gross earnings, which are earnings before any deductions are taken. The breakdown of FICA is 6.2% for Social Security (Old-Age, Survivors, and Disability Insurance or OASDI) and 1.45% for Medicare. The following table shows the FICA limits for 2005 through 2012:

2012 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65% (see note below)
Social Security Limit = $110,100
Maximum Social Security Contribution = $6,826.20

Note: The reduction to the Social Security withholding rate from 6.20% to 4.20% of wages that began in 2011 was extended through February 29, 2012.

2011 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65% (see note below)
Social Security Limit = $106,800
Maximum Social Security Contribution = $6,621.60 (employer) / $4485.60 (employee)

Note: In 2011, the FICA tax rate for employees was lowered to 5.65%. The employer tax rate remained unchanged, while the Social Security rate for employees was lowered to 4.20%.

2010 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65%
Social Security Limit = $106,800
Maximum Social Security Contribution = $6,621.60

2009 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65%
Social Security Limit = $106,800
Maximum Social Security Contribution = $6,621.60

2008 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65%
Social Security Limit = $102,000
Maximum Social Security Contribution = $6,324.00

2007 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65%
Social Security Limit = $97,500
Maximum Social Security Contribution = $6,045.00

2006 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65%
Social Security Earnings Limit = $94,200
Maximum Social Security Contribution = $5,840.40

2005 FICA Tax and Social Security Limits

FICA Tax Rate = 7.65%
Social Security Earnings Limit = $90,000
Maximum Social Security Contribution = $5,580.00

Overpayment of Social Security Taxes

If you work more than one job in any tax year, and your earnings are in excess of $106,800 in 2011 or $110,100 in 2012, then you may have paid too much Social Security tax. When you have more than one job in a calendar year, each of your employers is required to withhold Social Security taxes on your wages. In this situation, you may end up exceeding the maximum Social Security contribution limit. You can claim a refund on form 1040 when you file your personal income tax return with the Internal Revenue Service.

Medicare Taxes

As mentioned earlier, there is a 1.45% FICA tax that helps to fund the Medicare system. Employers are also required to make this payment, bringing the total funding to 2.9% of all wages earned.

Unlike payments made to Social Security, there are no maximum contribution limits or caps when it comes to Medicare. All wages earned in a given year are taxed at the 1.45% rate.

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