What comes out of your paycheck for Social Security and Medicare

Your employer withholds 6.2 percent of your gross pay for Social Security and 1.45 percent for Medicare. Your employer also pays an equal amount on your behalf — you do not see that money, but it counts toward your benefits. If you are self-employed, you pay both the employee and employer portions, which totals 15.3 percent, though you can deduct half of it on your tax return.

These are separate from federal income tax. Social Security and Medicare are payroll taxes that fund those specific programs. The Social Security portion stops once you reach the annual wage cap — in 2024, that cap is $168,600, meaning no Social Security tax is withheld on earnings above that amount. Medicare tax has no cap and continues on all wages.

The amounts you pay now determine your future benefits. Social Security uses your 35 highest-earning years to calculate your monthly benefit at retirement. Medicare Part A (hospital insurance) is funded entirely by these payroll taxes, while Part B (medical insurance) and Part D (prescription drug coverage) have separate premiums you pay in retirement.

Key Takeaways

  • Social Security tax is 6.2 percent of your pay up to $168,600 annually in 2024, and Medicare tax is 1.45 percent with no income limit.
  • Your employer pays an equal amount that does not appear on your paycheck but counts toward your future benefits.
  • Self-employed workers pay both portions, totaling 15.3 percent, though half is tax-deductible.
  • The Social Security portion you pay contributes to your retirement benefit calculation, which is based on your 35 highest-earning years.
  • Medicare Part A is fully funded by payroll taxes, while Parts B and D require separate premiums when you enroll.

How the Social Security wage cap works

Once your earnings reach $168,600 in a calendar year, no more Social Security tax is withheld from your paychecks for the rest of that year. This threshold, called the wage base, changes annually based on national wage trends. In 2023 it was $160,200; in 2024 it is $168,600; in 2025 it will be $176,100. The Social Security Administration announces the new cap each October for the following year.

This cap applies per employer, not per year. If you work two jobs and earn $100,000 at each, you will pay Social Security tax on all $200,000 combined, even though each employer's payroll system treats you separately. When you file your tax return, you can claim a credit for any excess Social Security tax withheld — this happens automatically if you use tax software or file through a tax professional.

Medicare tax has no wage cap. You pay 1.45 percent on every dollar you earn, no matter how much you make. High earners also pay an additional 0.9 percent Medicare tax on wages above $200,000 (single filers) or $250,000 (married filing jointly), which was added in 2013.

What self-employed workers pay

If you are self-employed, you pay self-employment tax, which covers both the employee and employer portions of Social Security and Medicare. The total is 15.3 percent: 12.4 percent for Social Security (up to the annual wage cap) and 2.9 percent for Medicare. You calculate this on your net business income after deducting business expenses.

The Social Security portion still stops at the wage cap. In 2024, once your net self-employment income reaches $168,600, you stop paying the 12.4 percent Social Security tax on additional earnings. Medicare tax continues on all income with no limit.

You can deduct half of your self-employment tax when you calculate your adjusted gross income on your tax return. This reduces your taxable income and partially offsets the burden of paying both portions. You report self-employment tax on Schedule SE (Form 1040) and pay it quarterly through estimated tax payments if you expect to owe $1,000 or more.

How these taxes fund your future benefits

Social Security and Medicare are not savings accounts where your money sits waiting for you. They are pay-as-you-go programs: the taxes you pay today fund benefits for current retirees, disabled workers, and their families. When you retire, your benefits come from taxes paid by workers at that time.

Your Social Security benefit amount is calculated using your 35 highest-earning years. The system credits you with earnings each year you work and pay into the program. If you work fewer than 35 years, zeros are averaged in for the missing years, which lowers your benefit. Working longer, especially in higher-earning years, increases your future monthly payment.

Medicare Part A (hospital insurance) is fully funded by the 1.45 percent Medicare payroll tax you and your employer pay. Part B (medical insurance for doctor visits and outpatient care) and Part D (prescription drug coverage) are funded partly by payroll taxes and partly by general tax revenue and premiums you pay when you enroll. The payroll taxes you pay now help fund the entire Medicare system for current beneficiaries.

Checking your Social Security record

You can see how much you have paid in Social Security and Medicare taxes by creating an account on ssa.gov and viewing your Social Security Statement. This statement shows your earnings history year by year, the taxes withheld, and an estimate of your future retirement, disability, and survivor benefits.

Review your earnings record for accuracy, especially if you have changed jobs or had name changes. Errors in your record can lower your future benefits. If you spot a mistake, you can contact the Social Security Administration to correct it, though you generally have three years, three months, and 15 days from the end of the year the earnings were reported to request a correction.

Your statement also shows how much you have paid in Medicare taxes over your lifetime. This helps you understand how much you have contributed to the program before you turn 65 and become may be able to access for Medicare.

Additional Medicare tax for high earners

If you earn more than $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately), you pay an extra 0.9 percent Medicare tax on the amount above those thresholds. This tax was introduced in 2013 as part of the Affordable Care Act and applies to wages, self-employment income, and certain investment income.

Your employer withholds this additional tax automatically once your wages exceed the threshold for your filing status. If you are self-employed, you calculate and pay it when you file your tax return. Unlike the standard Medicare tax, this additional tax does not fund Medicare directly — it goes to the general Treasury.

If you have multiple jobs or are married filing separately, the thresholds can be tricky to calculate. Tax software or a tax professional can help may support you are withholding the correct amount.

Frequently Asked Questions

Can I opt out of paying Social Security and Medicare taxes?

No, with rare exceptions. Most workers must pay these taxes. The only common exception is certain religious groups that have received a waiver from the Social Security Administration. Government employees hired before 1984 in some states may not pay Social Security tax, though they typically pay into an alternative retirement system instead.

What happens if I do not work long enough to pay into Social Security?

You need 40 credits to receive Social Security retirement benefits — roughly 10 years of work. If you have fewer credits, you will not receive a retirement benefit based on your own earnings, though you may be able to receive a spousal or survivor benefit if you are married or widowed. You can check your credits on your Social Security Statement online.

Do I pay Social Security and Medicare taxes on all types of income?

No. These taxes explore only to wages and self-employment income. Investment income, interest, dividends, and capital gains are not subject to Social Security or Medicare payroll taxes, though they may be subject to other taxes. Certain types of compensation, like employer-provided health insurance premiums, are also exempt.

What if I worked in another country — does that count toward Social Security?

It depends on whether the United States has a totalization agreement with that country. These agreements allow you to combine work credits from both countries to reach the 40 credits needed for benefits. The Social Security Administration maintains a list of countries with agreements. You can contact them to learn whether your foreign work counts.

When do I start receiving benefits after I have paid in?

You can start receiving Social Security retirement benefits as early as age 62, though your monthly payment will be permanently reduced. Full retirement age ranges from 66 to 67 depending on your birth year. If you wait until age 70, your benefit increases by 8 percent per year. Medicare begins at age 65 regardless of whether you have claimed Social Security.