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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.
For Medicare, your employer deducts a 1.45 percent tax from all your earnings (there's no ceiling) and matches it. Once you become self-employed, you'll have to pay both the employer and employee shares of Social Security taxes on your earnings â a total of 12.4 percent of your covered earnings in 2015. You'll also pay a total of 2.9 percent Medicare tax on all your earnings.