The U.S. FICA tax funds retirement and disability benefits under Social Security.
FICA stands for the Federal Insurance Contributions Act. It authorizes payroll taxes used primarily to finance Social Security and Medicare. The Social Security portion supports retirement, survivors, and disability insurance, while the Medicare portion supports the federal hospital insurance program.
Employees and employers generally each pay a share of the Social Security and Medicare taxes on covered wages. Self-employed people generally pay equivalent contributions through the self-employment tax system. The taxes are withheld from many workers’ paychecks, making FICA distinct from federal income tax withholding.
Social Security’s payroll tax has a wage base that can change over time, while the Medicare Hospital Insurance tax generally applies more broadly to wages. An additional Medicare tax also applies to wages above certain thresholds for some higher-income workers.