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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.
Half of the Medicare tax, or 1.45 percent, is paid for by the employer. The other half of the Medicare tax, also 1.45 percent, is paid for by the employee. The self-employed person pays both halves, but takes a deduction for the employer's portion of Medicare as a deduction against the income tax.