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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.
Deductions from your wages used to pay for your employer-sponsored benefits reduce your income and are excluded from taxes. In many cases, pretax deductions are exempt from Medicare tax; however, this isnât always the case.