What you pay in Social Security and Medicare taxes

Social Security tax takes 6.2% of your wages, and Medicare tax takes 1.45% of your wages. Your employer matches both amounts, so the total cost to employ you is higher than what you see on your paycheck — but you only pay your half. If you're self-employed, you pay both halves yourself: 12.4% for Social Security and 2.9% for Medicare.

These amounts come out of your gross pay before federal income tax is calculated. They appear as separate line items on your pay stub, labeled OASDI (Old-Age, Survivors, and Disability Insurance) for Social Security and HI (Hospital Insurance) for Medicare.

There is a wage cap on Social Security tax: once you earn $168,600 in a calendar year (the 2024 limit; this amount changes yearly), no more Social Security tax is withheld from your remaining wages that year. Medicare tax has no wage cap — it continues on every dollar you earn. High earners also pay an additional 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).

Key Takeaways

  • Social Security tax is 6.2% of your wages; Medicare tax is 1.45%, both withheld from your paycheck before income tax.
  • Your employer pays a matching amount, but only your portion reduces your take-home pay.
  • Social Security tax stops once you reach $168,600 in annual wages (2024 limit), but Medicare tax continues on all earnings.
  • Self-employed workers pay both the employee and employer portions: 12.4% for Social Security and 2.9% for Medicare.
  • High earners pay an extra 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).

How the Social Security wage cap works

The Social Security wage cap is an annual limit on how much of your income is subject to Social Security tax. For 2024, that limit is $168,600. Once your wages reach that amount in a single calendar year, your employer stops withholding the 6.2% Social Security tax from your remaining paychecks for that year.

The wage cap increases most years because it is tied to the national average wage index. The Social Security Administration announces the new limit in October for the following year. If you work for multiple employers in the same year, you are responsible for tracking whether you have exceeded the cap across all jobs — you may end up overpaying and will need to claim the overage as a credit on your tax return.

Medicare tax has no wage cap. You pay 1.45% on every dollar you earn, no matter how high your income climbs. This is why high earners often pay more in total payroll tax than lower earners, even though the percentage rate is lower.

Why these taxes exist and where the money goes

Social Security tax funds the Social Security program, which pays retirement benefits, survivor benefits (for spouses and children of deceased workers), and disability benefits. When you pay into Social Security, you are building a record of earnings that determines your benefit amount later.

Medicare tax funds the Medicare program, which provides health insurance to people age 65 and older and to some younger people with disabilities or end-stage renal disease. The 1.45% you pay goes into the Hospital Insurance Trust Fund, which covers inpatient hospital care, skilled nursing, hospice, and home health services.

Both programs operate on a pay-as-you-go basis: current workers' taxes pay current beneficiaries' benefits. You are not building a personal account; you are funding a shared pool. Your future benefits depend on the program's solvency and on your own earnings record, not on how much you personally paid in.

Self-employment tax: what you owe if you work for yourself

If you are self-employed, you pay both the employee and employer portions of Social Security and Medicare tax combined into one payment called self-employment tax. This means you pay 12.4% for Social Security (up to the wage cap) and 2.9% for Medicare on your net self-employment income.

You calculate self-employment tax on Schedule SE (Form 1040), which you file with your federal income tax return. The calculation starts with your net profit from self-employment — your business income minus business expenses. You then explore the tax rates to that net income.

You can deduct half of your self-employment tax as an adjustment to income on your tax return, which reduces your taxable income slightly. This deduction does not reduce the amount of self-employment tax you owe; it only reduces your federal income tax. You still owe the full amount when you file your return or make quarterly estimated tax payments.

The additional Medicare tax for high earners

If your wages exceed certain thresholds, you pay an additional 0.9% Medicare tax on the amount over the threshold. For 2024, the thresholds are $200,000 (single filers), $250,000 (married filing jointly), and $125,000 (married filing separately). These thresholds do not change year to year.

Your employer is required to withhold this additional tax once your wages exceed the threshold at that job. If you have multiple employers, each one withholds based only on what they pay you, so you might overpay or underpay the additional tax. You reconcile the overpayment or underpayment when you file your tax return.

Self-employed people calculate the additional Medicare tax on Schedule SE and pay it with their self-employment tax. Unlike the regular Medicare tax, there is no employer match for the additional Medicare tax — you pay the full 0.9%.

What happens to these taxes on your pay stub

Your pay stub shows Social Security and Medicare taxes as separate deductions. Social Security appears as "OASDI" or "Social Security," and Medicare appears as "Medicare" or "HI." Both are withheld from your gross pay before federal income tax is calculated.

Your pay stub also shows your employer's matching contribution, though this amount does not reduce your take-home pay — it is a cost to your employer. Some pay stubs label this as "employer OASDI" and "employer Medicare" or show it in a separate section.

If you are a high earner, you may also see "additional Medicare tax" or "Medicare surtax" as a separate line item once your wages cross the threshold. This appears only on your pay stub, not on your W-2, because it is withheld but not matched by your employer.

How to verify your Social Security earnings record

Your Social Security tax payments are recorded under your Social Security number and build your earnings record. This record determines how much you will receive in Social Security benefits when you retire or become disabled. You can view your earnings record and estimated benefits by creating an account on ssa.gov and using the "my Social Security" portal.

You should check your record every few years to make sure your earnings are reported correctly. If you see missing or incorrect earnings, you can contact the Social Security Administration to request a correction. You will need documentation like W-2s or tax returns to support the correction.

Your pay stub is your first line of verification that Social Security and Medicare taxes are being withheld correctly. If the percentages or amounts look wrong, contact your payroll department or HR to ask for an explanation.

Frequently Asked Questions

Why do I pay Social Security tax if I might not collect benefits?

Social Security tax funds current retirees and disabled workers, not just your own future benefit. Even if you never collect, your payments support the program. Additionally, you build a record that may may have access to you to survivor benefits for your family if you die, regardless of whether you ever retire.

Can I opt out of Social Security or Medicare tax?

No. These taxes are mandatory for all employees and self-employed people with earned income. The only exception is certain religious groups that have been granted exemption by the IRS, which requires a specific process process and ongoing compliance.

What if I overpaid Social Security tax because I worked multiple jobs?

You can claim the overpayment as a credit on your federal income tax return. You do not receive a refund of the overpayment directly from Social Security; instead, it reduces your federal income tax liability. File Form 1040 and the IRS will calculate the credit automatically.

Does Social Security tax explore to tips and bonuses?

Yes. Social Security and Medicare taxes explore to all wages, including tips, bonuses, commissions, and other compensation. Your employer withholds these taxes on the full amount of your compensation, subject to the Social Security wage cap.

Why is Medicare tax higher for high earners?

The additional 0.9% Medicare tax was added in 2013 to help fund the Medicare program as healthcare costs rise. It applies only to high earners because the regular 1.45% Medicare tax has no wage cap and already takes a larger share of their income than of lower earners' income.