Medicare and Social Security tax both have different purposes. Social Security tax is deducted for retirement and disability funds. Medicare tax is deducted for health care for people 65 years old and over. They are typically linked together on a pay stub through the Federal Insurance Contribution Act (FICA).
Both Medicare and Social Security tax are deducted as a percentage of a person's income. This percentage changes according to the tax rates each year, as well as the number of witholdings for each individual. The funds deducted from an employee's pay are then matched by the employer. The deductions for Medicare and Social Security tax are reported to the Internal Revenue Service (IRS) through federal income tax.
Social Security benefits are distributed as retirement income for individuals 65 years old and older. 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 reserve for future use.
Social Security funds can also be used to pay survivor's benefits. These benefits are typically paid to spouses or children of those who received Social Security and have died. They are generally assessed on an individual basis. Social Security department representatives provide individuals with specific information about potential survivor's benefits.
Medicare tax pays the cost of running the Medicare program. This health benefits program benefits retired individuals 65 years old and older. The program covers hospitalization and about 80% of all medical expenses, excluding prescription benefits. An optional supplemental plan can be added to this program, though this program may carry additional costs. The supplemental program pays for what Medicare does not.
All those earning income are required to pay both Medicare and Social Security tax. Each is a government run program, and employee tax funds are used to pay for the program costs. Many individuals receive medical care and attention through these programs. They help to ensure retirement benefits for individuals who do not have another source of income.
Social Security taxes fund a pension for those who reach retirement age of 65 years old and over. This allows the government to contribute to the support of senior citizens as well as those who are disabled. The Medicare and Social Security tax provides basic services and funding to those who are no longer in the work field.
