What comes out of your paycheck for Medicare and Social Security

Social Security and Medicare are funded by payroll taxes that you and your employer both pay. The amount depends on your wages and whether you are self-employed. For 2024, you pay 6.2% of your wages toward Social Security, up to a yearly earnings cap of $168,600. That means the maximum you pay in Social Security tax in a year is $10,453.20. Once you earn more than the cap, no additional Social Security tax is taken from your paycheck for the rest of that year.

Medicare tax works differently — there is no earnings cap. You pay 1.45% of all your wages toward Medicare Part A (hospital insurance), no matter how much you earn. If you are a higher earner, you may also pay an additional 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly). Your employer matches the 6.2% Social Security tax and the 1.45% Medicare tax, but not the additional 0.9% Medicare tax.

If you are self-employed, you pay both the employee and employer portions yourself. That means 12.4% for Social Security (up to the earnings cap) and 2.9% for Medicare, plus the additional 0.9% if your net self-employment income is above the thresholds. You can deduct half of your self-employment tax when you file your income tax return.

Key Takeaways

  • Employees pay 6.2% of wages for Social Security (capped at $168,600 in 2024) and 1.45% of all wages for Medicare Part A.
  • Self-employed people pay both the employee and employer share: 12.4% for Social Security and 2.9% for Medicare, plus 0.9% additional Medicare tax if income exceeds the threshold.
  • Your employer matches your Social Security and Medicare contributions, but you do not see this amount on your paycheck.
  • The Social Security earnings cap changes each year based on wage growth, but Medicare has no earnings limit.
  • Higher earners pay an additional 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).

How the Social Security earnings cap affects what you pay

The Social Security earnings cap is the maximum amount of your yearly wages that is subject to Social Security tax. In 2024, that cap is $168,600. If you earn $168,600 or less in a year, you pay 6.2% on all of it. If you earn $200,000, you pay 6.2% only on the first $168,600 — the remaining $31,400 is not taxed for Social Security.

The cap increases most years because it is tied to the average wage growth in the country. It went from $160,200 in 2023 to $168,600 in 2024. The Social Security Administration announces the new cap each October for the following year. This means high earners pay a smaller percentage of their total income toward Social Security than lower earners do.

Medicare tax has no earnings limit

Unlike Social Security, Medicare tax applies to every dollar you earn, with no cap. You pay 1.45% of your wages toward Medicare Part A for your entire career, no matter how much you make. This is one reason Medicare is sometimes called the "unlimited" tax.

The additional 0.9% Medicare tax kicks in only if you earn above certain thresholds. For single filers, that threshold is $200,000. For married couples filing jointly, it is $250,000. For married filing separately, it is $125,000. If you cross that threshold, you pay the extra 0.9% on all wages above it. Unlike the regular Medicare tax, your employer does not match this additional amount.

What happens if you work for multiple employers in one year

If you work for more than one employer during the same year, each employer withholds Social Security tax based on what you earn at that job alone. This can mean you pay more in Social Security tax than you should, because each employer withholds 6.2% without knowing about your other jobs.

For example, if you earn $100,000 at one job and $100,000 at another, each employer withholds $6,200 in Social Security tax. That is $12,400 total, but the cap means you should only pay $10,453.20 (6.2% of $168,600). You can claim the overpayment as a credit when you file your income tax return, and the IRS will refund the difference.

Medicare tax does not have this problem because there is no cap. You pay 1.45% on all wages from all employers, and that is correct.

Self-employed tax rates and deductions

If you are self-employed, you pay self-employment tax on your net business income. The rate is 15.3% total: 12.4% for Social Security (up to the earnings cap) and 2.9% for Medicare. This is double what an employee pays because you cover both the employee and employer portions.

You calculate self-employment tax on Schedule SE of your tax return. The net income you use is your business income minus business expenses. Once you have calculated your self-employment tax, you can deduct half of it on your income tax return. This deduction reduces your taxable income but does not reduce the amount of Social Security or Medicare credit you earn.

If your net self-employment income is above $200,000 (single) or $250,000 (married filing jointly), you also owe the additional 0.9% Medicare tax. You report this on Form 8959 when you file your taxes.

How these taxes fund Social Security and Medicare

The payroll taxes you pay go directly into two trust funds: the Social Security Trust Fund and the Medicare Hospital Insurance Trust Fund. These funds pay benefits to current retirees, disabled workers, and their families. The money you pay in now does not sit in an account with your name on it — it funds benefits for people receiving them today.

Social Security is designed so that current workers' taxes pay current beneficiaries' benefits. The same is true for Medicare Part A. As the population ages and fewer workers support each retiree, the balance between incoming taxes and outgoing benefits shifts. This is why you may hear that Social Security or Medicare faces long-term funding challenges.

What to ask your employer or tax preparer

If you are unsure whether the right amount is being withheld from your paycheck, ask your employer's payroll department to review your W-4 form. This form tells your employer how much to withhold for income tax, but it does not affect Social Security or Medicare withholding — those amounts are set by law.

If you work multiple jobs, ask each employer what they are withholding for Social Security tax. You can use this information to estimate whether you will overpay and need a refund when you file your taxes. A tax preparer can also help you understand your withholding and claim any overpayment.

If you are self-employed, a tax preparer or accountant can help you calculate your self-employment tax correctly and make sure you are setting aside enough money to pay it when your taxes are due.

Frequently Asked Questions

Does my employer's contribution to Social Security and Medicare count toward my benefits?

Yes. Your Social Security benefit is based on your total earnings, whether you or your employer paid the tax. The employer match is part of your wage record. Medicare Part A may be able to access is also based on your work history and the taxes paid on your behalf, not just the taxes you saw withheld from your paycheck.

What if I did not pay Social Security tax for some years?

Social Security benefits are based on your 35 highest-earning years. If you have fewer than 35 years of earnings, zeros are counted for the missing years, which lowers your benefit. Years with no earnings or very low earnings can be dropped if you have more than 35 years of work history. You can view your earnings record on your Social Security account at ssa.gov.

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

No. These taxes are mandatory for all employees and self-employed people. The only exception is certain religious groups that have received a specific exemption from the IRS, but this is rare and requires a formal process process.

Do I pay Social Security and Medicare tax on income other than wages?

Social Security and Medicare taxes explore only to wages and self-employment income. They do not explore to investment income, rental income, or retirement account withdrawals. However, some of your Social Security benefits may be taxable as income if your total income exceeds certain thresholds.

What happens to Social Security tax I paid if I die before I retire?

If you die before you start receiving Social Security, your family members may be able to receive survivor benefits based on your earnings record. Your spouse, children, and parents may all be may be able to access. The amount depends on your age at death and your earnings history. If no family members are may be able to access, the taxes you paid do not transfer to anyone — they remain in the Social Security Trust Fund.