Every paycheck has two kinds of federal tax taken out: FICA tax and income tax withholding. They work very differently. This guide explains how FICA tax and withholding work in 2026, and what that means for salary, bonuses and equity pay.
What is FICA tax?
FICA stands for the Federal Insurance Contributions Act. FICA tax funds Social Security and Medicare. Both you and your employer pay it.
| Tax | Employee rate | Employer rate | Wage limit for 2026 |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | First $184,500 of wages |
| Medicare | 1.45% | 1.45% | No limit |
| Additional Medicare tax | 0.9% | None | Wages over $200,000 |
The Social Security wage base
Social Security tax applies only up to the yearly wage base, which is $184,500 for 2026. So once your wages pass that amount, Social Security tax stops for the rest of the year. As a result, high earners often see a bigger paycheck late in the year.
However, if you work for two employers, each one withholds Social Security tax up to the limit. In that case, you can claim the excess as a credit on your tax return.
The additional Medicare tax
Your employer must withhold an extra 0.9% Medicare tax on wages over $200,000 in a year. But the actual threshold depends on your filing status: $200,000 for single filers, $250,000 for married couples filing jointly and $125,000 for married filing separately. So you may owe more, or get some back, when you file.
FICA tax for the self-employed
If you’re self-employed, you pay both halves through self-employment tax. The rate is 15.3% on 92.35% of your net earnings, up to the wage base for the Social Security part. However, you can deduct half of it when figuring your income tax.
How income tax withholding works
Unlike FICA, income tax withholding is an estimate of the income tax you’ll owe for the year. Your employer figures it from your pay and your Form W-4. Then, when you file your return, you settle up with a refund or a balance due.
Withholding on bonuses and RSUs
Bonuses and vested RSUs count as “supplemental wages.” Employers usually withhold federal income tax on them at a flat 22%, or 37% on amounts over $1 million a year. FICA tax applies to them too. For many high earners, 22% is too low, so they owe more at tax time. For more, see our guide to restricted stock units.
Check your FICA tax and withholding
- Review your pay stubs to confirm Social Security stops at the wage base.
- Claim a credit if two employers withheld too much Social Security tax.
- Update your W-4 after big life changes or large bonuses.
- Use the IRS Topic 751 guide to Social Security and Medicare withholding for details.
Get help with your withholding
We help employees and business owners plan withholding and avoid surprises at tax time. To review your situation, call (415) 842-2940 or book a free 15-minute call.