FICA stands for Federal Insurance Contributions Act, and it is a part of the US federal payroll tax.
FICA associates with Social Security applications. Your nine-digit quantity helps Social Security precisely report your lined wages or self-employment.
Working and paying FICA taxes helps you earn credit for Social Security advantages.
How a lot do I destine to FICA?
Social Security covers nearly 180 million folks in the United States. Around 6.2% of your gross wages goes to Social Security tax, and 1.45% of your wage ends in Medicare tax.
However, you aren’t the just one paying for Medicare or Social Security. The employer matches the common to 15.3% in each wage you receive.
FICA does not solely profit folks underneath Social Security and Medicare applications, which give advantages for retirees, the disabled, and kids. They profit you.
If you might be 30 or 40 years previous, your FICA contributions will assist your retirement in the future.
The cash you pay in taxes isn’t held in a private account so that you can use once you get advantages.
Today’s staff assist pay for present retirees and added advantages. Any unused cash goes to the Social Security belief funds to assist safe your future.
What if I’m self-employed?
According to the Self-Employment Contributions Act handed in 1954, self-employed contribute to Social Security and Medicare with taxes on internet earnings.
How are you able to calculate FICA?
Investopedia stated there are two methods for calculating FICA. Here’s one instance:
“An employee earning $50,000 will pay $3,825 in FICA contributions in 2022. That breaks down as $3,100 in Social Security tax and $725 in Medicare tax. The wage earner’s employer would pay the same amount.”
Social Security tax = $50,000 x .062 (the worker price of 6.2%) = $3,100
Medicare tax = $50,000 x .0145 (the worker price of 1.45%) = $725
Total FICA = $3,825 ($3,100 + $725)
