Medicare and Social Security taxes are very common in the United States. These taxes are different from the normal income taxes you pay. Social Security taxes and Medicare taxes are very important. You are to pay these taxes as long as you are working. However, there are some exceptions. You are exempt from paying Social Security taxes in some situations.
You are exempt from paying Social Security taxes if you belong to a certain religious group whose doctrine doesn’t allow its members to receive retirement benefits. Same applies if you are an international student, a scholar, a teacher, or a researcher, provided you are non-immigrant and non-resident aliens.
Individuals working in the United States must pay Medicare tax on their earnings, irrespective of your citizenship or residency status. This tax is not the same as Social Security tax, where foreign individuals are exempted from paying the tax. You must note that the taxes you pay (Social Security and Medicare) will come in handy when you are retired or disabled. Thus, it is pertinent you know everything about these taxes as it will help in your retirement plans.
Journey with me as I fill you in on critical things you need to know about these taxes.
When Do You Stop Paying Medicare and Social Security Taxes?
Almost everyone hates paying taxes. It is hated for several reasons. Some hate the fact that it’s compulsory, while others hate the fact that it reduces their salary. Everyone has one reason or another why they hate paying taxes.
In the course of your amazing life, you will be required to pay lots of taxes. Medicare and Social Security taxes are among the important taxes you’ll be required to pay. If you are already paying Medicare and Social Security taxes, I bet you have sat down one day and imagined if it was possible to halt the payment of these taxes. Let’s take a brief look at what Social Security and Medicare is.
Social Security is a federal program that offers you (and your spouse or ex-spouse, in some instances) with retirement benefits at 62 or later. On the other hand, Medicare is a federal health insurance program that offers you insurance coverage for some health care costs when you get to the age of 65. The Social Security and Medicare taxes you pay will be used to finance your Social Security and Medicare
It is important you note that there is no specific age when you’ll stop paying Social Security or Medicare taxes. You are to pay these taxes as long as you are working. However, for Social Security, once your income surpasses the limit ($137,700), you are exempt from paying the Social Security tax for that year. You are also exempt from paying Social Security if you are a self-employed worker who makes less than $400.
Do I Have to Pay Medicare and Social Security Tax?
If taxes were not compulsory or enforced by the IRS, no one will certainly pay. However, come to think of it. If you don’t pay taxes, how will the country develop? What will happen to you when you retire and have no income? Social Security and Medicare offer you enormous assistance when you retire. But, people still feel it’s unnecessary. Is it?
All income earners are required to pay Medicare and Social Security taxes. Avoiding these taxes is impossible, especially as an income earner. All employees and self-employed taxpayers are required to pay Social Security and Medicare taxes. However, you are exempted from paying Social Security taxes in some situations. If you are self-employed and earn less than $400, you are also exempt from paying this tax.
There is no age limit on Social Security and Medicare taxes. For instance, if you are 90 and you have a job that pays $50,000 as salary, you are still required to pay Social Security and Medicare taxes even if you are already eligible for these programs. Or peradventure, at 95, you are still doing consulting as an independent contractor, whatever income you make executing jobs is still subject to self-employment tax.
The IRS tries its best to ensure that taxpayers understand everything regarding the payment of tax. If you have questions regarding the minimum income needed to file taxes, or anything regarding how far back you can get a refund, ensure you don’t hesitate to contact the IRS You can also contact a tax expert for clarification.
Is Medicare Deducted From Your Social Security Check?
Medicare is a health insurance program that helps finance doctor visits, hospital stays, including other medical treatments. Medicare comes in some parts. There is the Part A, Part B, Part C, and Part D. Some individuals are always anxious to know if their Medicare will be deducted from their Social Security check. If you are among such individual, here is your answer:
Your Medicare is deducted from your Social Security check. In fact, if you enlisted in both Social Security and Medicare Part B (the part of Medicare that offers standard health insurance), the Social Security administration will automatically be removed from your monthly benefits.
Medicare Part A, which is the Medicare that finances hospitalization, is free for individuals who are qualified for Social Security, even if they are yet to claim benefits. You should have it in mind that you’ll have to make quarterly payments to finance your Medicare if you enlisted in Part B but is yet to receive Social Security. There are some payment methods available. You can either decide to pay electronically or via mail.
What Is the Income Limit Before Social Security Is Taxed?
Like the normal federal income tax, not everyone must pay taxes on their Social Security benefit. Retired personnel who boast of multiple sources of income, like pensions, retirement account withdraws, or part-time jobs may be required to pay taxes on their Social Security. The federal government imposes taxes on around 85% of Social Security payments for seniors who make more than a certain amount but never taxes the whole Social Security benefit. Here is how to determine if your benefit is subject to this tax.
- People with an overall income between $25,000 and $34,000 are taxed on 50 percent of their benefit.
- If your overall income is more than $34,000, you may have to pay tax on about 85% of your benefit.
- If you are married, you are likely to face a tax of 50% of your Social Security benefit if your income and that of your spouse is between $32,000 and $44,000.
- Around 85% of your Social Security income is subject to tax if you are married with an overall income that surpasses $44,000.
The taxability of your social benefit hinges on how much extra income you receive. In a situation where your Social Security benefit is your only source of income, you may have to pay taxes on it. However, if Social Security is your only source of income, you are exempt from paying federal income tax. A piece of advice: If you are required to pay tax on your Social Security benefit, and you decide not to, you will be published. It would be best if you didn’t try to intentionally leverage the IRS 10-year Statute of Limitations for tax debt. It may not end well.
Be rest assured that you won’t pay taxes on over 85% of your Social Security benefit.
Social Security Wage Base by Year:
| 2018 | $128,400 |
| 2017 | $127,200 |
| 2016 | $118,500 |
| 2015 | $118,500 |
| 2014 | $177,500 |
| 2013 | $113,700 |
| 2012 | $110,100 |
Source: Thebalancesmb
Can I Opt Out of Social Security and Medicare?
Social Security and Medicare are amazing programs tailored to help disabled individuals and retirees, especially those without any source of income. As awesome as these programs are, not all American citizens buy the idea. This is probably because one has to pay taxes on these programs to be eligible. With that being said, is it possible for uninterested individuals to opt out of these programs?
You can opt out of Medicare, but you’ll have to do so the right way to avoid severe penalties in the future. Part A Medicare (Basic Medicare hospital coverage) is free for almost all Americans. You are covered regardless of your wish, provided you have paid your Medicare taxes for a minimum of 10 years. On the other hand, it is also possible to opt out of Social Security. However, this rare option only applies to certain ministers and members of religious groups.
As a minister or a member of a religious group who wants to opt out of Social Security, you must submit an IRS form, under penalty of perjury, indicating why you are conscientiously opposed to accepting this benefit. You must also note that opting out of Social Security will have an effect on your Medicare Social Security disability (should you become disabled), retirement benefits, survivor insurance benefits, etc. So ensure you think well before you consider opting out of either Social Security or Medicare. You can as well contact your insurance agent before making a decision.
Is My Social Security Income Taxable?
| Combined Income | Individual Return | Married, Joint Return | Married, Separate Return |
| $0 to $24,999 | No tax | ||
| $25,000 to $34,000 | Up to 50% of SS may be taxable. | ||
| More than $34,000 | Up to 85% of SS may be taxable. | ||
| $0 to $31,999 | No tax | ||
| $32,000 to $44,000 | Up to 50% of SS may be taxable. | ||
| More than $44,000 | Up to 85% of SS may be taxable. | ||
| $0 and up | Up to 85% of SS may be taxable. |
Is Social Security Taxed Before or After Medicare Is Deducted?
When it comes to taxes like Social Security and Medicare, you find many unanswered questions, including misconceptions. For this reason, ensure you get your facts right before you make a decision or believe in anything. Some people assume that Social Security is taxed before Medicare is removed. Is this true?
Your Social Security benefit is taxable, provided you earn above the threshold (listed above). However, this benefit is usually taxed before your Medicare is deducted and not after.
It is important you note that Social Security doesn’t finance Medicare. But, if you receive Social Security benefits, your Part B premiums can be removed from your check. This simply denotes that, rather than $1,500, for instance, you’ll get $1,386.40, and your Part B premium would be footed.
Who Is Exempt From Social Security Taxes?
It is important that you pay Social Security taxes to have an income to rely on when you retire or can’t work due to a disability or health condition. As crucial as this tax is, not everyone is required to pay. Some certain categories of individuals are exempt from paying this tax.
These individuals are:
- Some religious groups
- Non-resident aliens
- Certain students
- People who work fit a foreign government.
Some religious groups:
Certain religious groups are eligible for Social Security tax exemption if their doctrine doesn’t allow them to receive Social Security benefits.
Non-resident aliens:
Non-resident aliens are eligible for Social Security tax exemption. However, this depends on the type of visa issued to them.
Certain students:
Current students who get a job at their University qualify for Social Security tax exemption on income received while working in such a University
People who work fit a foreign government:
People who work for a foreign government may be eligible for a Social Security tax exemption. However, individuals in this category must be on official duty to be eligible.
At What Point Do You Stop Paying Social Security Taxes?
Of all the taxes you’ll pay in your lifetime, none may be as unavoidable as those you pay for Social Security. Irrespective of your job status, be it that you are a salary earner or a self-employed individual, you must pay this tax throughout your working life. However, there a few exceptions. There is a point where you are exempted from paying Social Security taxes.
You stop paying Social Security tax for the year when your income rises above the $137,700 thresholds. In the year 2019, the threshold was placed at $132,900. The threshold changes each year and is usually regarded as the wage base limit. You are not required to pay Social Security tax on any income above this threshold.
Have it in mind that the wage base limit only applies to the Social Security tax; it doesn’t apply to Medicare. In fact, as your income rise, your Medicare tax rate rises too. The amount of funds you’ll receive as your Social Security benefit when you retire depends on your salary while you were working. Furthermore, the Social Security tax is among why your Social Security benefit is more if you retire late. If you stall your retirement until you get to your normal retirement age (FRA), then you would have been paying tax for a long time.
Social Security Tax Statistics:
| 69.1 million People received benefits from programs administered by the Social Security Administration (SSA) in 2019. |
| 5.7 million People were newly awarded Social Security benefits in 2019 |
| 55% of adult Social Security beneficiaries in 2019 were women. |
| 54.9 was the average age of disabled-worker beneficiaries in 2019. |
| 86% of Supplemental Security Income (SSI) recipients received payments because of disability or blindness in 2019. |
Do I Have to Pay Social Security Tax if I Am Retired?
Retirement is an awesome time to reflect on one’s amazing career. To be surrounded by loved ones and grandchildren. It is that period when you take a break from the struggles of going to work each morning in search of one’s daily bread. Your Social Security benefits will be activated during this period. That means you will be receiving Social Security check due to the Social Security taxes you paid while working. However, even when retired, you may still be required to pay some taxes.
At full retirement (65-67), you are eligible to get full Social Security Retirement benefits tax-free. But, if you are still working, probably as a personal contractor, etc., a portion of your Social Security retirement benefits might be taxed. The IRS adds the amount for your earnings and divides your Social Security benefits by 2. If the total is more than the IRS income threshold, your benefit will be subject to taxation.
Social Security benefits are only subject to federal income tax. However, if this benefit is your only source of income, you will be exempt from paying federal income tax. As soon as you attain full retirement age ( 65-67), the SSA will provide you with the option to file for benefits but not start receiving those payments until sometime in the future. You can prevent taxes on your Social Security benefits by delaying benefits until you retire. By so doing, you won’t only pay taxes on your benefits while getting them; you would also incur devalued retirement credit, which raises your benefits as soon as you begin to collect them.
