FICA stands for the Federal Insurance Contributions Act. It is a U.S. federal payroll tax that is deducted from each paycheck. The tax helps fund both Social Security and Medicare programs, which provide benefits for retirees, the disabled, and children. The FICA tax rate is a combination of two separate tax rates: the Social Security tax rate (6.2%) and the Medicare tax rate (1.45%), which together make up the FICA tax rate (7.65%). Employers are required to withhold FICA taxes from their employees paychecks and match them. As employees work and pay FICA taxes, they earn credits for Social Security benefits.