FICA Tax Exemptions
1. Student Exemption: Students employed by a school, college, or university where they are also enrolled and regularly attending classes may be exempt from FICA taxes on wages earned from their work at the educational institution.
2. Exemption for Certain Religious Groups: Members of recognized religious groups, such as ministers, priests, or members of religious orders, may be exempt from paying FICA taxes on income earned in the exercise of their duties as ordained, commissioned, or licensed ministers or members of religious orders.
3. Exemption for Government Employees: Certain government employees, such as federal employees covered under the Federal Employees Retirement System (FERS), may be exempt from paying Social Security and Medicare taxes. Instead, they may be covered by alternative retirement and healthcare systems.
4. Exemption for Railroad Employees: Railroad employees covered under the Railroad Retirement Act may be exempt from paying Social Security and Medicare taxes and instead contribute to the Railroad Retirement program.
5. Exemption for Certain Student Employees: Full-time students employed by their college or university under a work-study program or other employment arrangement may be exempt from paying FICA taxes on their wages.
What is FICA Tax & How it Works : Rates & Exemptions
FICA stands for Federal Insurance Contributions Act, which is a U.S. federal payroll tax that funds Social Security and Medicare programs. FICA taxes are withheld from employees’ paychecks and are also contributed by employers. The tax consists of two components, Social Security Tax and Medicare Tax. Social Security gives money to retired people, disabled individuals, and some widows and widowers. Medicare is a program that helps older people and some disabled people pay for their medical needs.
Geeky Takeaways:
- The FICA tax, integral to the U.S. tax system, ensures funding for Social Security and Medicare programs.
- Social Security benefits include retirement income, support for the disabled, and assistance to surviving spouses and children of deceased workers.
- Medicare provides health insurance to people aged 65 and older and some younger individuals with disabilities.
Table of Content
- How do FICA Taxes Work?
- Who Pay FICA Tax and Why?
- How are FICA Taxes Calculated?
- Wage Base Limits of FICA Tax
- FICA Tax Exemptions
- Do Non-US Citizens have to pay FICA Taxes?
- Conclusion
- FICA Tax – FAQs