The tax rates that come out of your paycheck
Social Security tax takes 6.2% of your wages, and Medicare tax takes 1.45%. Together, that is 7.65% of your gross pay before any other deductions. If you are self-employed, you pay both the employee and employer portions — 12.4% for Social Security and 2.9% for Medicare, totaling 15.3%.
These percentages have stayed the same for years. Social Security tax only applies to earnings up to a certain cap — in 2024, that cap is $168,600. Once you earn above that amount in a year, Social Security tax stops coming out of your paycheck. Medicare tax, by contrast, has no earnings cap, so it continues on every dollar you make.
There is also an additional Medicare tax of 0.9% that applies if your income exceeds certain thresholds. For single filers, that threshold is $200,000; for married couples filing jointly, it is $250,000. This extra tax only applies to income above the threshold.
Key Takeaways
- Social Security tax is 6.2% of your wages up to $168,600 per year; Medicare tax is 1.45% with no earnings limit.
- Self-employed workers pay both the employee and employer share: 12.4% for Social Security and 2.9% for Medicare.
- An additional 0.9% Medicare tax applies to high earners — those making over $200,000 (single) or $250,000 (married filing jointly).
- These taxes fund your future Social Security benefits and Medicare coverage, not general government spending.
Why the earnings cap matters for Social Security
The Social Security earnings cap means higher earners pay a smaller percentage of their total income into the system. Someone earning $200,000 pays Social Security tax only on the first $168,600, while someone earning $50,000 pays on all $50,000. This is by design — Social Security is structured as a social insurance program where benefits are tied to earnings history, not to how much tax you paid.
The cap changes each year based on wage growth. It was $160,200 in 2023 and $168,600 in 2024. The Social Security Administration announces the new cap in October for the following year, so you can see it coming if you are near the threshold.
Medicare tax has no ceiling
Unlike Social Security, Medicare tax continues on every dollar you earn, no matter how high your income goes. This means a person earning $500,000 pays Medicare tax on the full amount. The additional 0.9% Medicare tax for high earners also has no cap — it applies to all income above the threshold.
This difference reflects how the two programs work. Social Security replaces a portion of your pre-retirement income based on your earnings record. Medicare is primarily an insurance program for people 65 and older, so the tax structure does not have the same income-replacement logic.
What self-employed people pay
If you work for yourself, you pay both the employee and employer portions of these taxes. That means 12.4% for Social Security (up to the earnings cap) and 2.9% for Medicare, plus the additional 0.9% Medicare tax if your income is high enough. The total can reach 15.3% before the additional tax.
Self-employed workers can deduct half of their self-employment tax when calculating their adjusted gross income for tax purposes. This deduction does not reduce the amount you owe into Social Security and Medicare — it only affects your federal income tax calculation. You still owe the full amount to these programs.
If you have both W-2 income and self-employment income in the same year, the Social Security tax cap applies to your combined earnings. You may end up paying more Social Security tax than someone with only W-2 income if your total crosses the threshold.
How these taxes fund your future benefits
Social Security and Medicare taxes are not general income taxes — they fund specific programs. The Social Security tax you pay today goes toward current retirees' benefits, while your own future benefits will be funded by workers paying in after you retire. Medicare tax similarly funds the hospital insurance portion of Medicare (Part A) for current beneficiaries.
This is why the earnings cap for Social Security matters to your future benefits. Your benefit amount is calculated based on your highest 35 years of earnings, up to the annual cap. Earning above the cap in a given year does not increase your benefit, because the excess earnings are not counted in the formula.
Frequently Asked Questions
Does the Social Security tax cap reset every year?
Yes. The cap applies to earnings in each calendar year separately. If you earn $168,600 in 2024 and then earn another $50,000 in 2025, you will pay Social Security tax on the full $50,000 in 2025 because 2025 has its own cap. The cap increases most years based on national wage growth.
Can I opt out of Social Security or Medicare tax?
No. These taxes are mandatory for all workers, with very limited exceptions. Some government employees hired before 1984 may not pay into Social Security, and certain religious groups can request exemption, but these are rare. If you work, you pay these taxes.
What happens if I work past age 65?
You continue paying Social Security and Medicare taxes on your wages, even after you start receiving Social Security benefits. If you earn above a certain amount before your full retirement age, your benefits may be temporarily reduced. After you reach full retirement age, there is no earnings limit and no reduction.
Why do I see different Medicare tax amounts on my paystub?
You may see the standard 1.45% Medicare tax plus an additional 0.9% if your income crosses the high-earner threshold. Some employers withhold the additional tax automatically; others may not withhold it correctly if you have multiple jobs. Check your paystub to confirm the amounts match your income level.
Is the additional Medicare tax permanent?
Yes. The additional 0.9% Medicare tax was introduced in 2013 as part of the Affordable Care Act and remains in effect. It applies to wages, self-employment income, and certain investment income for high earners. The thresholds ($200,000 for single filers, $250,000 for married filing jointly) have not changed since it began.