The Key Difference Between Medicare Tax And Social Security Tax

If you're still of working age, you might be like a lot of Americans who dream of retiring to spend more time traveling, enjoying hobbies, and hanging out with family and friends. Some people might also be looking forward to becoming eligible for retirement benefits provided by the federal government, like Social Security and Medicare.

While you wait to reach retirement age, you're probably keenly aware of (and maybe a little frustrated with) the Federal Insurance Contributions Act (FICA) taxes that are taken out of your paycheck. Your pay stubs show how much you're paying in FICA taxes, which cover your contribution to the Social Security and Medicare programs. Although most people think of FICA as a single deduction, there are several differences between Social Security and Medicare taxes. The key distinction is that Social Security tax has an income limit, whereas the Medicare tax does not. The rates also vary between these two types of FICA taxes. 

Once your wages hit a certain limit, you stop paying the Social Security portion of FICA but continue paying the Medicare taxes. As of 2025, you'll pay the Social Security portion of FICA on the first $176,100 you earn in a year. Above that threshold, you would not pay the Social Security tax on any money you earn for the year. The Social Security Administration adjusts the income limit based on the average wage index, and the Social Security salary cap increased in 2025 from its level of $168,600 in 2024. Although these adjustments can seem significant, they occur most years, and they're nowhere near the biggest changes made to Social Security in its history. The last time the cap didn't increase from year to year was between 2015 and 2016.

Medicare taxes do not have a wage base limit, meaning the tax rate will apply to your entire salary no matter how much you earn. In fact, earning more may leave you paying a higher Medicare tax. In another difference from the Social Security tax, workers who file taxes as a single person while earning more than $200,000 have to pay an extra 0.9% in Medicare taxes on any amount over that threshold (or over $250,000 for couples filing jointly). It's called the Additional Medicare Tax.

Another difference between the Social Security and Medicare taxes is in the rate you have to pay. For the Social Security tax, the worker's portion is 6.2%, while the employer contributes another 6.2% for a total of 12.4%. Meanwhile, the Medicare tax rate is 1.45% for the portion that comes out of the employee's paycheck. The employer pays another 1.45%, for a total contribution of 2.9%. If you're subject to the Additional Medicare Tax because you earn over the $200,000 (or $250,000) threshold, you'll pay another 0.9% on any wages above this limit. Employers do not have to contribute any amount for the Additional Medicare Tax.

If you're self-employed, there is no employer contributing their portion of the FICA taxes. This means self-employed people pay the entire rate of 12.4% for Social Security (up to the cap) and 2.9% for Medicare. Self-employed people also have to pay the Additional Medicare Tax if their earnings are high enough.