How much comes out of your paycheck for Social Security and Medicare

Social Security and Medicare are funded by payroll taxes taken directly from your wages. For 2024, you pay 6.2% of your earnings toward Social Security, up to a yearly earnings cap of $168,600. You also pay 1.45% of all your earnings toward Medicare, with no earnings cap — meaning the Medicare tax applies to every dollar you make. Your employer matches both amounts, so the total going into these programs is double what you see on your pay stub.

If you are self-employed, you pay both the employee and employer portions yourself: 12.4% for Social Security and 2.9% for Medicare. Self-employed workers can deduct half of these taxes when filing income taxes, which offsets some of the cost.

These percentages and the Social Security earnings cap change slightly each year. The cap rises when average wages in the country rise. The percentages themselves have stayed the same since 1990 for Social Security and since 1966 for Medicare, though Congress can change them.

Key Takeaways

  • You pay 6.2% of your wages toward Social Security (up to $168,600 in 2024) and 1.45% of all wages toward Medicare, with your employer matching both amounts.
  • The Social Security earnings cap changes each year based on national wage trends, so higher earners pay the tax only on income up to that limit.
  • Self-employed workers pay both the employee and employer portions: 12.4% for Social Security and 2.9% for Medicare.
  • Additional Medicare tax of 0.9% applies to wages above $200,000 for single filers and $250,000 for married couples filing jointly, and you pay this without employer match.

The Social Security earnings cap and why it matters

Social Security tax only applies to earnings below a certain threshold, called the earnings cap. In 2024, that cap is $168,600. If you earn $200,000 a year, you pay Social Security tax only on the first $168,600 of your income. Once you reach the cap, no more Social Security tax comes out of your paycheck for the rest of that year.

This cap exists because Social Security benefits are tied to your earnings history, and the program replaces a smaller percentage of income for higher earners. The cap rises most years — it was $160,200 in 2023 and $168,600 in 2024 — because it is linked to the national average wage index.

Medicare tax has no earnings cap. You pay 1.45% on every dollar you earn, no matter how much you make. High earners also pay an additional 0.9% Medicare tax on wages above $200,000 (single filers) or $250,000 (married couples filing jointly).

What happens to the money you pay in

Social Security and Medicare taxes do not go into a personal account with your name on it. Instead, the money goes into trust funds that pay benefits to current retirees, disabled workers, and survivors. When you retire, your benefits come from taxes paid by workers who are working at that time.

For Social Security, your earnings history determines how much you receive. The program calculates your benefit based on your 35 highest-earning years. If you worked fewer than 35 years, zeros are counted for the missing years, which lowers your benefit amount.

For Medicare, the taxes you pay fund Part A (hospital insurance) and Part B (medical insurance). Part A covers hospital stays, skilled nursing, and hospice. Part B covers doctor visits, outpatient care, and preventive services. You become may be able to access for Medicare at age 65, regardless of how much you paid in.

How your earnings record affects future benefits

Social Security keeps a record of your earnings each year, and you can view this record online through your Social Security account at ssa.gov. The record shows how much you paid in Social Security tax and estimates what your benefit might be at different ages.

If you spot an error on your earnings record — a missing year, an employer name spelled wrong, or earnings attributed to the wrong person — you should report it to Social Security as soon as you notice it. Errors can lower your benefit estimate. Social Security has a limited time window to correct records, so do not wait.

Your benefit amount also depends on when you claim. If you claim at 62, your benefit is smaller than if you wait until your full retirement age (66 or 67, depending on your birth year) or until 70. For every year you delay past your full retirement age, your benefit grows by about 8% per year until age 70.

Self-employed workers and quarterly tax payments

If you are self-employed, you report your income on Schedule C when you file taxes, and you pay self-employment tax on that income. Self-employment tax covers both the employee and employer portions of Social Security and Medicare: 12.4% for Social Security (on earnings up to the cap) and 2.9% for Medicare (on all earnings).

Self-employed workers usually pay self-employment tax quarterly using Form 1040-ES, or they can pay it all at once when they file their annual tax return. You can deduct half of your self-employment tax as a business expense, which reduces your taxable income.

If you have both self-employment income and wages from an employer, the Social Security tax from your wages counts toward the earnings cap first. Any remaining cap room applies to your self-employment income. This prevents you from paying more than the cap allows.

Changes to Social Security and Medicare taxes over time

The Social Security tax rate has been 6.2% since 1990. The Medicare tax rate has been 1.45% since 1966. Congress would need to pass new legislation to change these rates, which has not happened in decades. However, Congress does adjust the Social Security earnings cap each year.

The additional Medicare tax of 0.9% on high earners was added in 2013 as part of the Affordable Care Act. This tax applies only to wages above the thresholds mentioned earlier and is not matched by employers.

Social Security faces long-term funding challenges because the population is aging and fewer workers are paying in relative to the number of people receiving benefits. The Social Security trustees project that the trust fund reserves will be depleted sometime in the 2030s if no changes are made. If that happens, incoming tax revenue would cover only about 80% of scheduled benefits. Congress would need to act — either by raising the tax rate, raising the earnings cap, lowering benefits, raising the full retirement age, or some combination — to address this shortfall.

Frequently Asked Questions

Why do I pay Social Security tax if I might not get the full benefit back?

Social Security is not designed to return exactly what you paid in. It is a social insurance program that also pays benefits to your family members if you die and to you if you become disabled before retirement. On average, most people do receive more in lifetime benefits than they paid in taxes, but this varies based on life expectancy, family situation, and when you claim.

Can I opt out of Social Security or Medicare taxes?

No. Social Security and Medicare taxes are mandatory for all workers and self-employed people. The only exception is some members of certain religious groups who have received a formal exemption from the Internal Revenue Service, which is rare and requires specific documentation.

What if I worked in another country — does that time count toward Social Security?

It depends on the country and whether the United States has a totalization agreement with that country. These agreements allow you to combine work credits from both countries to meet the requirement for Social Security benefits. The Social Security Administration website lists which countries have these agreements.

Do I pay Medicare tax on investment income or retirement account withdrawals?

No. Social Security and Medicare taxes explore only to wages and self-employment income. Investment income, interest, dividends, and withdrawals from retirement accounts like 401(k)s and IRAs are not subject to these payroll taxes. However, high-income earners may pay an additional 3.8% Net Investment Income Tax on investment gains, which is separate from Medicare tax.

If I paid Social Security tax for many years but did not work 35 years, how is my benefit calculated?

Social Security uses your 35 highest-earning years to calculate your benefit. If you worked fewer than 35 years, the program counts zeros for the missing years, which lowers your average. This is why some people who took time out of the workforce for caregiving or other reasons may receive a lower benefit than someone who worked consistently for 35 or more years.