FICA stands for the Federal Insurance Contributions Act. It covers two taxes: Social Security at 6.2%, up to the yearly wage base, and Medicare at 1.45% with no cap. An extra 0.9% Medicare tax applies to wages over $200,000.
Reported tips count as wages for FICA. If your wages are $300 and your reported tips are $700 in a pay period, FICA is figured on $1,000: $62.00 for Social Security and $14.50 for Medicare.
The federal "no tax on tips" deduction (tax years 2025 to 2028) is an income tax deduction only. It does not lower Social Security or Medicare tax on tips. Check IRS guidance for who qualifies, and see Social Security and Medicare on tips.
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