Social Security and Medicare Taxes
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Social Security and Medicare Taxes
Social Security and Medicare taxes—also known as FICA taxes—have been 6.2 percent each for employers and employees for Social Security, and 1.45 percent each for Medicare. Both the employer and employee pay Social Security taxes on the employee’s wages up to $176,100 in 2025. (There is no limit to the amount of wages to which the Medicare tax applies.) Once that limit is reached, no more taxes are withheld for Social Security for the rest of the calendar year. For Medicare, an additional 0.9% tax is withheld on earned income above certain thresholds (but not matched by employers). Withholding of FICA taxes is resumed at the beginning of the new calendar year. The FICA withholding limit is indexed for inflation, so it increases each year based on the general level that prices have increased in the economy during the past year, known as the inflation rate.
Things To Know
- Both the employer and employee pay Social Security taxes on the employee’s wages.
What is Social Security?
Social Security is a federally sponsored retirement income and disability income program. Based on how much a person has earned during their lifetime, they receive benefits once they retire. The earliest permissible age to receive Social Security benefits is currently 62. If beneficiaries wait until age 65, 66 or 67 to receive benefits, their monthly benefit is larger than if they started taking benefits at age 62. The benefits received do not equal what a beneficiary contributed into the system, as retired workers generally end up getting more in benefits than they contributed.
What is Medicare?
Medicare taxes pay for the Medicare health care program, which provides health care coverage for all US citizens over the age of 65. Coverage includes hospitalization, care by physicians, and some drug and medical equipment benefits.