What the Social Security tax rate is and who pays it

The Social Security tax rate is 6.2 percent of your wages, and your employer pays another 6.2 percent on your behalf — a total of 12.4 percent. If you are self-employed, you pay both sides yourself: 12.4 percent total. Medicare tax is separate: 1.45 percent from you, 1.45 percent from your employer, for 2.9 percent combined. Self-employed workers pay the full 2.9 percent.

These amounts are taken from your paycheck before you see it. Your employer sends both the employee and employer portions to the Internal Revenue Service. The money funds Social Security retirement, disability, and survivor benefits, and Medicare hospital insurance.

There is a wage cap on Social Security tax only. In 2024, you pay Social Security tax on earnings up to $168,600. Anything you earn above that is not taxed for Social Security. Medicare tax has no cap — you pay 1.45 percent on all wages, no matter how high. High earners also pay an additional 0.9 percent Medicare tax on wages over $200,000 (single filers) or $250,000 (married filing jointly).

Key Takeaways

  • Social Security tax is 6.2 percent from your pay and 6.2 percent from your employer; Medicare tax is 1.45 percent from each side.
  • The Social Security wage cap changes yearly — in 2024 it is $168,600, meaning earnings above that are not taxed for Social Security.
  • Medicare tax has no wage cap and applies to all earnings, plus an extra 0.9 percent for high earners.
  • Self-employed workers pay both the employee and employer portions themselves: 12.4 percent for Social Security and 2.9 percent for Medicare.
  • These taxes fund Social Security retirement and disability benefits, and Medicare hospital insurance.

How the wage cap affects what you pay

The Social Security wage cap is the maximum amount of your annual earnings that is subject to the 6.2 percent tax. The cap rises each year based on wage growth in the economy. In 2024, the cap is $168,600. If you earn $180,000 in a year, you pay Social Security tax only on the first $168,600 — the remaining $11,400 is not taxed for Social Security.

This cap means high earners pay a smaller percentage of their total income into Social Security than lower earners do. A person earning $50,000 pays 6.2 percent on all of it. A person earning $500,000 pays 6.2 percent only on $168,600, which works out to about 2.1 percent of their total income.

Medicare tax works differently. There is no wage cap on the standard 1.45 percent rate. You pay it on every dollar you earn. However, if you earn more than $200,000 (or $250,000 if married filing jointly), you pay an additional 0.9 percent Medicare tax on the amount above that threshold.

What self-employed workers pay

If you are self-employed, you pay both the employee and employer portions of Social Security and Medicare tax. That means 12.4 percent for Social Security (up to the wage cap) and 2.9 percent for Medicare (no cap). You calculate this on your net self-employment income — your business income minus business expenses.

Self-employed workers report these taxes on Schedule SE when they file their tax return. The IRS allows you to deduct half of your self-employment tax as a business expense on your income tax return, which reduces your overall tax burden slightly. You may also owe quarterly estimated tax payments if you expect to owe more than a certain amount when you file.

How these taxes fund Social Security and Medicare

The Social Security tax you pay funds three programs: retirement benefits for workers age 62 and older, disability benefits for workers who cannot work due to a medical condition, and survivor benefits for the families of deceased workers. The money does not sit in an account with your name on it. Instead, current workers' taxes pay current beneficiaries, and future workers' taxes will pay your benefits when you retire.

Medicare tax funds Part A, which covers hospital stays, skilled nursing care, and hospice. It does not cover doctor visits or prescription drugs — those are covered by Part B and Part D, which have separate premiums you pay when you enroll.

Changes to the tax rate and wage cap over time

The Social Security and Medicare tax rates have been the same since 1990. The 6.2 percent Social Security rate and 1.45 percent Medicare rate are set by law and do not change from year to year. However, Congress can change them if it passes new legislation.

The Social Security wage cap, by contrast, changes every year. The IRS adjusts it based on the National Average Wage Index, which measures average earnings across the economy. In 2023, the cap was $160,200. In 2024, it rose to $168,600. The cap typically increases by a few thousand dollars each year, though the exact amount depends on wage growth.

The additional 0.9 percent Medicare tax on high earners was added in 2013 as part of the Affordable Care Act. It applies only to wages above the income thresholds mentioned earlier.

Why you see these amounts on your pay stub

Your pay stub shows Social Security tax and Medicare tax as separate line items. You will see "FICA" or "OASDI" (Old Age, Survivors, and Disability Insurance) for Social Security, and "Medicare" for the Medicare portion. These are deducted before you receive your paycheck.

Your employer also pays their share, but that amount does not appear on your pay stub — it is a separate cost to the employer. However, both amounts are reported to the IRS and counted toward your Social Security and Medicare record.

Frequently Asked Questions

Why is there a wage cap for Social Security but not Medicare?

Social Security was designed to replace a portion of your pre-retirement income, so it caps the amount of earnings it taxes. Medicare is structured as insurance for hospital costs, which can affect anyone regardless of income, so it has no cap on the standard rate.

Do I pay Social Security tax on tips and bonuses?

Yes. Social Security tax applies to all wages and compensation you receive, including tips, bonuses, and commissions. The only limit is the annual wage cap — once you reach it, no more Social Security tax is withheld for the rest of that year.

What happens if I work for two employers in the same year?

Both employers will withhold Social Security tax from your pay. 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.

Do government employees pay Social Security tax?

Most do, but some state and local government employees are covered by different pension systems and do not pay Social Security tax. Federal employees hired after 1983 pay Social Security tax. Check with your employer's payroll department if you are unsure.

Can the Social Security tax rate change?

Only Congress can change the tax rate through new legislation. The rate has been 6.2 percent since 1990. There have been discussions about raising it in the future to address Social Security funding, but no change has been made.