Medicare and Social Security tax both have different purposes. Social Security tax deducted for retirement and disability funds. Medicare tax is deducted for health insurance for persons aged 65 and over. They are typically tied together on a pay stub through the Federal Insurance Contribution Act (FICA).
Both Medicare and Social Security taxes are deducted as a percentage of a person’s income
This percentage changes according to applicable tax rates each year, as well as the number of witholdings for the individual. The funds deducted from the employee’s salary are then matched by the employer. The deductions for Medicare and Social Security taxes are reported to the Internal Revenue Service (IRS) through federal income taxes.
Social benefits are distributed as pension income for the individual 65-year-old and the elderly. These benefits also apply to disability income for those who can no longer work due to a recognized disability. Current Social Security Deductions fund the benefits of those who are retired now. A percentage of the fund is held in a government trust on the reserve for later use.
Social security funds and funds can also be used to pay survivors’ benefits. These benefits are typically paid to spouses or children of those who received social security and died. They are generally assessed on an individual basis. Social Security Department representatives provide individuals with specific information about potential survivors’ benefits.
Medicare tax pays the cost of operating the Medicare program
This health benefits program benefits retired people age 65 and older. The program covers hospitalization, and about 80% of all medical expenses, except prescription benefits. An optional supplementary plan may be added to this program, although this program may incur additional costs. The supplementary program pays for what Medicare does not.
All those who earn income are required to pay both Medicare and Social Security taxes. Each is a government run program and employee tax funds are used to pay for the program costs. Many individuals receive medical treatment and attention through these programs. They help secure pension benefits for people who have no other source of income.
Social Security taxes fund a pension for those who reach retirement age of 65 and over
This allows the government to contribute to the support of the elderly as well as those who are disabled. The Medicare and Social Security tax contains basic services and funds for those who are no longer in the work field.