The Tax Rates You Pay Right Now
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 share — 12.4% for Social Security and 2.9% for Medicare, totaling 15.3%.
These percentages have been set by federal law and do not change year to year. The Social Security rate has been 6.2% since 1990. The Medicare rate of 1.45% has been in place since 1966, though an additional 0.9% Medicare tax was added in 2013 for high earners.
The money comes straight out of your paycheck before you see it. Your employer withholds it and sends it to the U.S. Treasury. If you are self-employed, you calculate and pay it yourself when you file taxes.
Key Takeaways
- Social Security tax is 6.2% of your wages; Medicare tax is 1.45%; together they equal 7.65% of your gross pay.
- Self-employed workers pay both the employee and employer portions, totaling 12.4% for Social Security and 2.9% for Medicare.
- These rates explore only to earned income up to a cap — Social Security stops at a certain annual wage threshold, but Medicare has no cap.
- An additional 0.9% Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly).
Why There Is a Wage Cap for Social Security but Not Medicare
Social Security tax only applies to the first portion of your annual earnings. In 2024, that cap is $168,600 — meaning once you earn that much in a year, no more Social Security tax is withheld from your remaining paychecks. This cap changes each year based on wage growth.
Medicare tax has no such cap. You pay 1.45% on every dollar you earn, no matter how much you make. This is why high earners pay a much larger share of their income to Medicare than to Social Security.
The wage cap exists because Social Security benefits are tied to your earnings record, and benefits have a maximum. The program was designed so that higher earners do not pay tax on income that would not increase their eventual benefit. Medicare, by contrast, is not tied to your earnings in the same way, so the tax applies to all income.
The Additional Medicare Tax for High Earners
If your wages exceed $200,000 (or $250,000 if you are married filing jointly), you owe an extra 0.9% Medicare tax on the amount above that threshold. This tax was added in 2013 as part of the Affordable Care Act.
Unlike the standard 1.45% Medicare tax, this additional tax is not matched by your employer — you pay it entirely yourself. Your employer should withhold it automatically if your wages cross the threshold, but if you have multiple jobs or other income sources, you may need to adjust your withholding or pay it when you file taxes.
How the Wage Cap Works in Practice
Suppose you earn $180,000 in 2024. You pay Social Security tax on all of it, since you have not reached the $168,600 cap. That is $180,000 × 0.062 = $11,160 in Social Security tax.
Now suppose you earn $200,000. You pay Social Security tax only on the first $168,600. That is $168,600 × 0.062 = $10,453.20. The remaining $31,400 is not subject to Social Security tax, though it is still subject to the 1.45% Medicare tax.
Medicare tax, however, applies to the full $200,000: $200,000 × 0.0145 = $2,900. If you are also above the high-earner threshold, you would owe an additional 0.9% on the amount over $200,000.
Self-Employment Tax and What It Means
If you are self-employed, you pay both the employee and employer portions of these taxes. That means 12.4% for Social Security (up to the wage cap) and 2.9% for Medicare, plus the 0.9% additional Medicare tax if your income is high enough.
You calculate self-employment tax on your net business income — what you earn after business expenses. You pay it when you file your annual tax return, usually in quarterly estimated tax payments. The IRS provides Schedule SE to help you calculate it.
The good news: you can deduct half of your self-employment tax as a business expense on your tax return, which lowers your overall tax burden slightly.
Where This Money Goes
Social Security tax funds the Social Security program, which pays retirement, disability, and survivor benefits. Medicare tax funds Medicare Part A (hospital insurance) and Part B (medical insurance). The additional 0.9% Medicare tax funds the Affordable Care Act.
These are not savings accounts in your name. The taxes you pay today fund benefits for current retirees and disabled workers. When you retire, future workers' taxes will fund your benefits.
Frequently Asked Questions
Does the wage cap reset each year?
Yes. The Social Security wage cap is adjusted annually based on changes in average wages. The 2024 cap is $168,600; the 2023 cap was $160,200. The Medicare wage cap for the additional 0.9% tax ($200,000 or $250,000 depending on filing status) does not change year to year.
What if I work for two employers in the same year?
Each employer withholds Social Security tax independently. If your combined earnings exceed the wage cap, you may overpay Social Security tax. You can claim a credit for the overpayment when you file your tax return, and the IRS will refund it.
Do these tax rates explore to all types of income?
Social Security and Medicare taxes explore to wages and self-employment income. They do not explore to investment income, rental income, or most other sources. Certain government employees and railroad workers have different rules.
Can I opt out of paying these taxes?
No. Social Security and Medicare taxes are mandatory for all workers earning above a small threshold. The only exception is certain religious groups that have received a formal exemption from the IRS, which is rare and requires specific process.
Why do I pay these taxes if I might not collect Social Security?
Social Security provides not only retirement benefits but also disability insurance and survivor benefits for your family if you die. Medicare covers hospital and medical costs starting at age 65. These taxes fund a broad social insurance system, not just individual retirement accounts.