How much you pay depends on whether you're working or already retired

If you're still working, you and your employer each pay 1.45% of your wages for Medicare and 6.2% for Social Security. Your employer matches both amounts. If you're self-employed, you pay both the employee and employer share — 2.9% for Medicare and 12.4% for Social Security — on your net business income.

Once you're on Medicare, you pay a monthly premium for Part B (doctor visits and outpatient care) and possibly Part D (prescription drugs). Part B costs around $164 per month in 2024, though higher earners pay more. Part A (hospital care) is free if you or your spouse paid Medicare taxes for at least 10 years while working. Part D premiums vary by plan and region, typically ranging from $7 to $100+ per month.

Social Security doesn't charge a monthly premium once you start receiving it. Instead, you've already paid through payroll taxes during your working years. However, if your income is high enough in retirement, you may owe income tax on part of your Social Security benefits.

Key Takeaways

  • Working people pay 1.45% for Medicare and 6.2% for Social Security, with employers matching both amounts.
  • Self-employed workers pay the full 15.3% combined rate (2.9% Medicare plus 12.4% Social Security) on net business income.
  • Medicare Part B costs roughly $164 monthly in 2024, with higher-income retirees paying surcharges; Part A is free for those who paid Medicare taxes for 10+ years.
  • Social Security has no monthly premium, but benefits may be taxable if your retirement income exceeds certain thresholds.
  • Medicare Part D prescription drug premiums vary widely by plan and location, so comparing options can lower your costs.

Medicare payroll taxes while you're working

The Medicare tax rate is fixed at 1.45% of your gross wages, taken from every paycheck. There's no income cap — you pay this rate on all earnings, no matter how much you make. Your employer withholds it automatically and sends it to the IRS along with their matching 1.45%.

If you earn over $200,000 as a single filer (or $250,000 married filing jointly), you pay an additional 0.9% Medicare tax on income above that threshold. This extra tax started in 2013 and applies to wages, self-employment income, and some investment income. Your employer withholds it the same way as the standard Medicare tax.

These taxes fund Medicare Part A (hospital insurance) and Part B (medical insurance). You don't choose where your money goes — it all goes into the same trust fund that pays current beneficiaries.

Social Security payroll taxes while you're working

Social Security tax is 6.2% of your wages, up to a cap. In 2024, you pay Social Security tax only on the first $168,600 of earnings. Once you reach that amount in a calendar year, no more Social Security tax is withheld from your paychecks for the rest of that year. Your employer matches the 6.2%.

The wage cap changes every year based on average wage growth in the economy. It typically rises by a few thousand dollars annually. This means high earners pay a smaller percentage of their total income into Social Security than lower-wage workers.

The money you pay goes into a trust fund that pays current retirees, disabled workers, and survivors' benefits. You build a record of earnings that determines how much you receive later.

What you pay for Medicare after you turn 65

Part A (hospital insurance) costs nothing if you or your spouse paid Medicare taxes for at least 10 years. If you didn't, you can buy it for up to $505 per month in 2024, depending on how many years you paid taxes. Most people have Part A automatically when they turn 65.

Part B (doctor and outpatient care) has a standard monthly premium of $164.90 in 2024. However, if your modified adjusted gross income (MAGI) from two years prior exceeds certain thresholds, you pay a higher amount. For example, single filers with MAGI over $97,000 pay surcharges ranging from $41.60 to $248.70 extra per month. Married couples filing jointly face surcharges at MAGI over $194,000. These income-based premiums are called Income-Related Monthly Adjustment Amounts (IRMAA).

You also pay an annual deductible before Part B coverage kicks in — $240 in 2024 — and you pay 20% coinsurance for most services after that.

Medicare Part D prescription drug costs

Part D premiums vary significantly by plan and location. Basic plans may cost $7 to $15 per month, while more comprehensive plans run $50 to $100+ monthly. You choose a plan during your initial enrollment period or during the annual open enrollment period (October 15 to December 7).

Like Part B, Part D premiums are subject to IRMAA surcharges if your income is high. You may pay an additional $12 to $77 per month depending on your income level and filing status.

Beyond the premium, you also pay out-of-pocket costs when you fill prescriptions: a copay or coinsurance for each drug, depending on the plan and the drug's tier. Most plans have an annual deductible (often $100 to $500) and a coverage gap called the "donut hole," where you pay a higher percentage of drug costs until you reach catastrophic coverage.

Income-based surcharges (IRMAA) explained

If you have higher income in retirement, Medicare charges you extra for Part B and Part D. These surcharges are based on your Modified Adjusted Gross Income (MAGI) from two years before. For example, if you're explore for Medicare in 2024, Medicare looks at your 2022 tax return.

MAGI includes wages, interest, dividends, capital gains, and certain other income. It's not the same as your Adjusted Gross Income (AGI) on your tax return — Medicare adds back certain deductions. The thresholds are $97,000 for single filers and $194,000 for married couples filing jointly in 2024. These thresholds don't change year to year, so as your income grows, you may move into a higher surcharge bracket.

If your income drops significantly — due to retirement, a major loss, or other life changes — you can request a reduction in your IRMAA surcharges by filing a form with Social Security and providing documentation of the change.

Social Security benefits and income tax

Social Security itself has no monthly premium. However, depending on your total retirement income, you may owe federal income tax on part of your benefits. This is separate from the payroll taxes you paid while working.

The IRS uses a formula based on your "combined income" — which includes adjusted gross income, nontaxable interest, and half of your Social Security benefits. If your combined income exceeds $25,000 as a single filer (or $32,000 married filing jointly), up to 50% of your benefits may be taxable. If it exceeds $34,000 as a single filer (or $44,000 married), up to 85% of your benefits may be taxable.

Many retirees owe no tax on their benefits because their income stays below these thresholds. Others owe tax on a portion. Some states also tax Social Security benefits, though most do not. Check your state's rules if you live outside the United States or in a state with an income tax.

Frequently Asked Questions

Do I pay Medicare tax on all my income, or is there a cap?

Medicare tax has no income cap — you pay 1.45% on all wages. Social Security tax does have a cap: in 2024, you pay 6.2% only on the first $168,600 of earnings. Once you reach that amount in a year, no more Social Security tax is withheld.

What happens if I'm self-employed?

You pay both the employee and employer share of both taxes. That's 2.9% for Medicare and 12.4% for Social Security, totaling 15.3%, on your net business income. You can deduct half of the self-employment tax on your income tax return.

Can I reduce my Medicare Part B premium if my income drops?

Yes. If you experience a major life change — retirement, loss of income, divorce — you can request a reduction in your IRMAA surcharges. Contact Social Security with documentation of the change, and they will recalculate your premium based on your current income.

Will I owe taxes on my Social Security benefits?

It depends on your total retirement income. If your combined income (adjusted gross income plus half your Social Security benefits) exceeds $25,000 as a single filer or $32,000 married filing jointly, some of your benefits may be taxable. Many retirees owe no tax because their income stays below these thresholds.

Why do I pay more for Medicare Part B if I have high income?

Income-related surcharges (IRMAA) were added to Medicare in 2007 to have higher-income beneficiaries pay a larger share of Part B and Part D costs. The surcharges are based on your income from two years prior, so changes in your current income won't affect your premium until the following year.