Social Security & More
If you or your spouse work in a job that pays taxes into the Social Security system, you may be building up “work credits” so that you will qualify for Social Security retirement income, as well as for Medicare health insurance coverage.
Income tax under FICA (the Federal Insurance Contributions Act) is composed of the old-age, survivors, and disability taxes, which as a group is also commonly referred to as Social Security taxes. Likewise, employees and business owners pay Medicare taxes, which are also known as the “hospital insurance tax.”
The current tax rate for Social Security (in 2023) is 6.2% for the employer and 6.2% for the employee – or a total of 12.4%. The current tax rate for Medicare is 1.45% for the employer and 1.45% for the employee – or a total of 2.9%. (Note that if you are self-employed, you will typically be required to pay both the employee and the employer portions.)
There may be an additional Medicare tax that applies to those who have wages over a threshold amount. In addition, there is a wage base limit for the Social Security tax – in this case, if you earn more than $142,800 (in 2021).
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