FICA
Social Security and Medicare tax on wages. Half comes out of the employee's pay and the employer pays the other half.
FICA is the Social Security and Medicare tax on wages. The name comes from the Federal Insurance Contributions Act. It's the two lines on a pay stub that most people skim past.
The worker pays 6.2% for Social Security and 1.45% for Medicare, per IRS Topic 751. The employer pays the same again, so the total is 15.3%. For 2026, Social Security stops at $184,500 of wages. Medicare doesn't stop. And once one employee's wages pass $200,000, the employer has to hold back an extra 0.9% on top.
The employer takes the worker's half out of each paycheck, adds its own half and deposits both. Every quarter it files Form 941 to report it.
If you own an S corp and pay yourself, you're on both sides, so both halves come out of your money. A $40,000 salary means $6,120 of FICA. The company can deduct its half as a business expense.
Self-employed people pay it too, just under another name: self-employment tax, 15.3% on 92.35% of profit. The S corp saving comes from trading that for FICA on a modest salary.