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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.
The Medicare payroll tax is 2.9%. It applies only to earned income, which is wages you are paid by an employer, plus tips. Youâre responsible for 1.45% of the tax, and itâs deducted automatically from your paycheck.