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For example, younger persons who are still working probably arenât on Medicare and are still paying into the system by a rate of 6.2% of their annual earnings. Elderly persons on Medicare can use the IRS tax deduction to reduce their tax burden by claiming costs associated with Medicare payments.
Medicare taxes are another mandatory payroll tax deduction. Medicare taxes are FICA taxes that fund state and federal medical and hospital insurance services. For 2011, the employee tax rate for Medicare taxes is 1.45 percent. Unlike Social Security taxes, there is no wage base limit for Medicare taxes.