What Social Security and Medicare taxes are

Social Security and Medicare taxes are separate payroll deductions taken from your wages while you work. They fund two different federal programs: Social Security pays retirement, disability, and survivor benefits; Medicare pays for hospital insurance, medical insurance, and prescription drug coverage once you turn 65. Both are mandatory taxes on earned income, and both your employer and you pay a share.

These taxes appear as line items on your pay stub. You cannot opt out of them, and the money goes directly to the federal government, not into a personal account with your name on it. Understanding how much you pay and why helps you plan for retirement and know what to expect when you become may be able to access for these programs.

Key Takeaways

  • Social Security tax is 6.2% of your wages (your employer pays another 6.2%), and Medicare tax is 1.45% (your employer pays another 1.45%).
  • Self-employed people pay both the employee and employer share, which totals 12.4% for Social Security and 2.9% for Medicare.
  • Social Security tax only applies to income up to a yearly cap, which changes each year; Medicare tax has no income cap.
  • An additional 0.9% Medicare tax applies to high earners, though most seniors no longer pay this once they stop working.
  • Your pay stub shows these deductions, and your Social Security statement shows how much you have paid over your lifetime.

Social Security tax rate and income cap

You pay 6.2% of your gross wages toward Social Security, and your employer pays an equal 6.2%. This tax only applies to earned income—wages from a job or net profit from self-employment—not to investment income, pensions, or rental income.

There is a yearly income cap on Social Security tax. In 2024, you only pay Social Security tax on the first $168,600 of your annual wages. Once you earn more than that amount in a year, no additional Social Security tax is taken from your paycheck for the rest of that year. This cap changes each year based on wage growth. If you change jobs during the year, each employer withholds Social Security tax separately until you hit the cap, which means you may overpay temporarily—but you can claim the overage as a credit when you file your tax return.

Medicare tax rate and how it differs

You pay 1.45% of your gross wages toward Medicare, and your employer pays an equal 1.45%. Unlike Social Security tax, there is no yearly income cap on Medicare tax. You pay 1.45% on every dollar you earn, no matter how much you make.

If you earn more than a certain threshold, an additional Medicare tax of 0.9% applies. For 2024, this extra tax kicks in at $200,000 for single filers and $250,000 for married couples filing jointly. Your employer withholds this additional tax automatically if your income crosses the threshold. Most people who are retired and no longer working do not pay this extra tax, since it only applies to earned income from wages or self-employment.

What self-employed people pay

If you are self-employed, you pay both the employee and employer share of these taxes. This means you pay 12.4% toward Social Security (up to the yearly income cap) and 2.9% toward Medicare on your net self-employment income. You can deduct half of your self-employment tax when you file your income tax return, which provides some offset.

Self-employed people report these taxes on Schedule SE when they file their annual tax return. The Social Security Administration tracks your self-employment income and credits it toward your future Social Security benefits, just as it does for wage earners. If your net self-employment income is less than $400 in a year, you generally do not owe self-employment tax, though you may still want to file to establish work history.

How these taxes fund your future benefits

The Social Security and Medicare taxes you pay now fund current beneficiaries' checks and care. Social Security is a pay-as-you-go system: the taxes collected from today's workers pay today's retirees, disabled people, and survivors. When you retire and become may be able to access for Social Security at age 62 or later, your benefit amount is based on your lifetime earnings record and the age at which you claim.

Medicare taxes work similarly. The 1.45% you pay funds Hospital Insurance (Part A), which covers inpatient hospital stays, skilled nursing, hospice, and some home health care. When you turn 65, you become may be able to access for Medicare Part A automatically if you have paid Medicare taxes for at least 10 years (40 quarters). Your lifetime Medicare tax payments do not sit in an account; they support the current Medicare system, and you draw from it when you are may be able to access.

Where to find your tax payment record

Your Social Security statement shows your lifetime earnings and the taxes you have paid into Social Security and Medicare. You can view this statement online at ssa.gov by creating a my Social Security account. The statement lists your earnings year by year and estimates your future Social Security benefit based on your current work record.

Your pay stub also shows current-year deductions for Social Security and Medicare taxes. If you work for an employer, your W-2 form (sent each January) lists total Social Security and Medicare wages and taxes withheld for that year. Self-employed people report this information on their tax return. Keeping these records helps you verify that your earnings are being credited correctly and that you are on track for the benefits you expect.

What happens if you work past full retirement age

If you continue working after you start receiving Social Security, you still pay Social Security and Medicare taxes on your wages. There is no age at which these taxes stop being withheld from your paycheck as long as you are earning wages. However, if you have not yet reached your full retirement age and you are receiving Social Security benefits, your benefits may be reduced if your earnings exceed a certain amount—but the taxes you pay continue to count toward your benefit record and may increase your future benefit amount.

Once you reach full retirement age, you can earn as much as you want without any reduction to your Social Security benefits, though you still pay the taxes. Many people continue working past full retirement age specifically because the additional earnings can increase their lifetime benefit amount.

Frequently Asked Questions

Why do I pay Social Security and Medicare taxes if I might not get the money back?

These taxes fund current benefits for retirees, disabled workers, and survivors right now. When you retire, the taxes paid by future workers fund your benefits. You are not building a personal account; you are part of a shared system. Most people who work 10 or more years receive back more in benefits than they paid in taxes, though this varies by life expectancy and family situation.

Can I get a refund of Social Security and Medicare taxes?

No. These are mandatory taxes that fund federal programs, not voluntary contributions you can reclaim. If you overpay Social Security tax in a year (by working for multiple employers or changing jobs), you can claim the overage as a credit on your income tax return, but you cannot get a refund of Medicare tax or request money back from the Social Security system.

Do I pay these taxes on my pension or retirement account withdrawals?

No. Social Security and Medicare taxes only explore to earned income from wages or self-employment. Withdrawals from IRAs, 401(k)s, pensions, and other retirement accounts are not subject to these payroll taxes, though they may be subject to income tax. Once you stop working, you stop paying these taxes.

What if I worked in another country—do those years count?

It depends on whether the United States has a totalization agreement with that country. Some countries have agreements that allow work history to be combined for Social Security purposes. You can contact the Social Security Administration or visit ssa.gov to learn whether your work in another country counts toward your U.S. Social Security benefit.

How do I know if my earnings are being reported correctly?

Check your Social Security statement at ssa.gov, which shows your earnings year by year. If you spot an error, contact Social Security as soon as possible with proof (like a W-2 or tax return). Errors are easier to correct the sooner you report them. Your employer should also provide a W-2 showing your wages and taxes withheld.