Medicare and Social Security taxes are mandatory taxes in the United States. Most employers handle the deduction of these taxes from their employees' paychecks and make payments to the federal government on their employees' behalf. Independent contractors or people who receive a 1099 form have to make payments to the government directly. These taxes are a flat percentage of your income.
Both an employee and employer pay equal percentages of the employee's income to the government for Social Security tax. This tax is equal to 12.4% of the employee's income. In 2013 if you are employed, both you and your employer will each pay 6.2% of your income up to $113,700 (total income). The maximum amount of income that is subject to Social Security taxes generally increases each year. If you are self-employed, you will be responsible for paying the whole 12.4% of your income up to $113,700. Together, an employee and employer will pay at most $13,243.20 in Social Security taxes throughout the year.
Both an employee and employer pay equal percentages of the employee's income to the government for Medicare tax. This tax is equal to 2.9% of the employee's income. In 2013 if you are employed, both you and your employer will pay 1.45% of your income; there is no maximum income limit. If you are self-employed, you will be responsible for paying the entire 2.9% to the government.
Additional Medicare Tax
Beginning in 2013 there is an Additional Medicare Tax of .9% imposed upon a person's wages if they file taxes as single, head of household and qualifying widow(er) and earn more than $200,000 or married filing jointly and earn more than $250,000 (half of this for married filing separately).
After paying into Medicare and Social Security, a citizen would expect to be able to receive some financial and medical security down the line. But eligibility for benefits is based on a credit system. Most people need 40 credits to fully qualify for Medicare and Social Security. You can earn a maximum of 4 credits per year, and each credit is gained by earning $1,160. Most individuals will meet the necessary credit total after 10 years of being employed.
Age to Receive Benefits
Receiving benefits depends on your age and the year in which you were born. Anyone born after 1960 can receive full benefits from Social Security after reaching age 67. At age 62, you can begin to receive benefits; however, they will be greatly reduced -- 30% less than what you would have received if you had waited until age 67 to receive benefits. If you were born prior to 1960, the Social Security website can show you what your benefits will be depending on what age you decide to begin receiving benefits. In order to receive Medicare benefits you or your spouse must have worked for at least 10 years. You must also generally be at least 65 years of age and be a citizen or permanent resident of the United States. If you are not age 65, you may also qualify for Medicare if you have permanent kidney failure requiring dialysis or transplant.