July 10, 2025
In the United States, Social Security and Medicare are funded through two separate tax systems: FICA (Federal Insurance Contributions Act) for employees and SECA (Self-Employment Contributions Act) for those who are self-employed. Everyone who earns income contributes to these programs, either through payroll deductions or self-employment taxes, depending on whether they’re legally classified as an employee or an independent contractor. For employees, FICA requires both the employer and the employee to split the tax burden evenly, with the employer responsible for withholding and remitting the full amount. Meanwhile, self-employed individuals, including sole proprietors filing a Schedule C, are subject to SECA, which taxes their net earnings from business. Although SECA’s rate appears higher, it’s designed to mirror the FICA structure by allowing a reduction in taxable income and a deduction for half of the tax paid, helping ensure fairness across the board.
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