FICA Tax Deductions

Only self-employed people can deduct any Social Security and Medicare tax.

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The Social Security tax and the Medicare tax, both authorized by Federal Insurance Contributions Act, apply to your earned income. Technically, you can't ever deduct your FICA taxes. But you might be able to reduce your income taxes if you're self-employed or if too much was withheld.

Social Security Portion Limits

The Social Security portion of FICA taxes applies to only a certain amount of your income each year. As a result, there's a maximum amount you'll have to pay. For example, in 2012, the Social Security tax applied to $110,100 of earned income. With an employee rate of 4.2 percent, the most you'd have to pay was $4,624.20. Typically, your employer keeps track of how much you've earned and stops collecting the Social Security portion of the tax when you reach $110,100. However, if you work multiple jobs, your employers might not know about the other income and might withhold too much.

Claiming Overpayment

If you have only one employer, request your employer to refund any excess withheld. If it refuses, you can file a claim with Form 843, but you can't claim a credit on your income tax return. If you have multiple employers, you can claim the excess withheld as a credit on your tax return on either line 69 of Form 1040 or line 41 of Form 1040A. This amount directly reduces the tax you owe.

Self-Employment Taxes

Self-employment taxes are effectively the same as FICA taxes, but they are imposed on self-employment income. As a self-employed person, you're effectively both the employee and the employer, so the self-employment taxes equal the total of the employer and employee portions of the FICA taxes. For example, in 2012 the employer paid 6.2 percent in Social Security taxes and 1.45 percent in Medicare taxes, and the employee paid 4.2 percent for Social Security and 1.45 percent for Medicare. As a result, the self-employment tax equaled 13.3 percent.

Self-Employment Tax Deduction

The self-employment tax deduction equals the equivalent of the employer portion of the self-employment taxes you paid during the year. For example, in 2012 the employer portion of the FICA taxed 6.2 percent for Social Security and 1.45 percent for Medicare. So you can deduct the portion of your self-employment tax that an employer would have paid if you had been an employee rather than being self-employed.

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About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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