FICA Taxes
Federal Insurance Contributions Act taxes for Social Security and Medicare, which HSA payroll contributions help you avoid.
What is FICA Taxes?
FICA taxes are the Social Security and Medicare taxes withheld from your paycheck. The combined rate is 7.65% (6.2% Social Security + 1.45% Medicare), and your employer pays an additional 7.65% on your behalf.
When you contribute to an HSA through payroll deduction, you avoid FICA taxes on those contributions. This is an extra tax benefit beyond the income tax deduction. Direct HSA contributions (from your bank account) don't avoid FICA.
For someone contributing $4,000 to an HSA through payroll, the FICA savings alone is $306 ($4,000 × 7.65%). This is money you keep that would otherwise go to taxes. Self-employed individuals avoid the full 15.3% FICA through HSA contributions.
Frequently Asked Questions
How much do I save on FICA with HSA contributions?
7.65% of your contribution if done through payroll. On a $4,000 contribution, that's $306 in FICA savings.
Do self-employed people get FICA savings?
Yes. Self-employed individuals pay the full 15.3% FICA (employer + employee portions), so HSA contributions save even more.
Why don't direct contributions save FICA?
FICA is calculated on your paychecks. By the time you make a direct contribution from your bank, FICA has already been paid on that income.
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