The Percentages Deducted From Your Wages

Social Security tax is 6.2% of your gross wages, and Medicare tax is 1.45% of your gross wages. Together they total 7.65% of what you earn before taxes. Your employer matches these amounts, so the total cost to employ you is 15.3%, but you only see your half deducted from your paycheck.

These are payroll taxes, meaning they come out automatically before you receive your pay. You will see them listed separately on your pay stub as "FICA" (Federal Insurance Contributions Act) or sometimes broken out as "Social Security" and "Medicare" or "HI" (Hospital Insurance).

If you are self-employed, you pay both the employee and employer portions yourself — 12.4% for Social Security and 2.9% for Medicare, totaling 15.3%. You report this on your tax return and pay it when you file or in quarterly estimated tax payments.

Key Takeaways

  • Social Security tax is 6.2% of your wages and Medicare tax is 1.45%, deducted automatically from every paycheck.
  • Your employer pays an equal amount on your behalf, but only your portion appears as a deduction on your pay stub.
  • Self-employed people pay both the employee and employer share, which is 15.3% combined.
  • These taxes fund your future Social Security retirement and disability benefits and your Medicare coverage at age 65.
  • There is a wage cap on Social Security tax but no cap on Medicare tax.

Why the Social Security Percentage Has a Wage Cap

Social Security tax of 6.2% only applies to wages up to a certain amount each year. That cap changes annually — in 2024 it was $168,600, meaning you stop paying Social Security tax once your earnings reach that point. Your employer also stops matching at that threshold.

Medicare tax has no wage cap. You pay 1.45% on every dollar you earn, no matter how much you make. However, there is an additional 0.9% Medicare tax on wages above $200,000 (if single) or $250,000 (if married filing jointly), which you pay entirely yourself with no employer match.

The wage cap exists because Social Security is designed as a social insurance program with a benefit formula that replaces a percentage of your past earnings. Higher earners receive benefits, but the formula does not replace as large a percentage of their income. The cap reflects this structure.

How These Taxes Fund Your Benefits

The 6.2% you pay into Social Security funds current retirees, disabled workers, and survivors' benefits. When you retire at your full retirement age, your benefit is calculated based on your 35 highest-earning years. The more you earned and the longer you worked, the higher your benefit.

The 1.45% Medicare tax funds hospital insurance (Part A), which covers inpatient hospital stays, skilled nursing, hospice, and home health care. You become covered by Medicare at age 65 automatically if you have paid Medicare tax for at least 10 years (40 quarters). You do not have to pay a premium for Part A coverage — it is funded by the payroll tax you already paid.

These are not savings accounts in your name. The taxes you pay today go directly to pay benefits for people receiving them now. When you retire, future workers' taxes will fund your benefits.

What Happens if You Work While Receiving Social Security

If you claim Social Security before your full retirement age and continue working, you still pay the 6.2% Social Security tax on your wages. However, Social Security will reduce your monthly benefit by $1 for every $2 you earn above an annual limit (the limit changes yearly and was $23,400 in 2024).

Once you reach your full retirement age, the earnings limit no longer applies, and you receive your full benefit regardless of how much you work. You continue paying the 6.2% tax, but it no longer affects your benefit amount.

You always pay Medicare tax on your wages, whether you are receiving Social Security or not. If you are already on Medicare, the tax continues to fund the program for others and for future beneficiaries.

Self-Employment and These Tax Rates

If you are self-employed, you pay both the employee and employer portions of these taxes. The self-employment tax rate is 15.3% total: 12.4% for Social Security and 2.9% for Medicare. You calculate this on your net self-employment income (your business income minus business expenses).

You report self-employment tax on Schedule SE (Form 1040) when you file your income tax return. You can deduct half of your self-employment tax as a business expense on your tax return, which reduces your taxable income slightly.

If you have both W-2 wages and self-employment income, the Social Security wage cap applies to your combined earnings. Once you hit the cap through W-2 wages, you do not pay the 12.4% Social Security portion on self-employment income above that threshold in the same year.

How These Percentages Have Changed Over Time

The Social Security tax rate of 6.2% has been in place since 1990. Before that, it was lower — it started at 1% in 1937 and increased gradually as the program expanded. The rate is set by law and can only be changed by Congress.

Medicare tax of 1.45% has been the standard rate since 1966, when Medicare began. The additional 0.9% Medicare tax on high earners was added in 2013 as part of the Affordable Care Act.

Congress periodically discusses changes to these rates, particularly to Social Security, because the trust fund that pays benefits is projected to be depleted in the mid-2030s if no changes are made. However, any change to the tax rate would require new legislation.

Frequently Asked Questions

Why do I see FICA on my pay stub instead of Social Security and Medicare?

FICA stands for Federal Insurance Contributions Act, the law that created these payroll taxes. Some employers list the taxes as "FICA" as a single line item, while others break them out separately as "Social Security" and "Medicare" or "HI." Both show the same deductions — it is just a labeling difference.

Can I opt out of paying Social Security or Medicare tax?

No. These are mandatory payroll taxes for all workers. The only exception is certain religious groups that have been granted exemptions, and even then the rules are strict and require specific documentation.

What if I paid too much Social Security tax in a year?

If you had multiple jobs and your combined wages exceeded the annual cap, you may have overpaid. You can claim a refund of the excess on your tax return. Your employer is not required to track this across multiple employers, so you have to catch it yourself.

Do I pay these taxes on tips and bonuses?

Yes. Social Security and Medicare taxes explore to all wages, including tips, bonuses, commissions, and most other forms of compensation. Your employer should include these in your gross wages for tax purposes.

If I am not a U.S. citizen, do I still pay these taxes?

If you are working legally in the United States with a valid work visa or green card, yes, you pay these taxes like any other worker. Undocumented workers who work with fraudulent documents may pay these taxes but may not be able to claim benefits later.