Not everyone pays Medicare tax at the same rate, and some people pay none at all

Medicare tax comes out of your paycheck if you work as an employee, but the rules change depending on how you work and how much you earn. Most employees and employers split the cost equally — each pays 1.45 percent of wages. Self-employed people pay both halves themselves: 2.9 percent total. But certain groups — religious communities that object to insurance, some government workers hired before 1984, and nonresident aliens on certain visas — do not pay Medicare tax at all.

There is also an additional Medicare tax of 0.9 percent that kicks in once your income passes a threshold. That threshold depends on your filing status and can catch you by surprise if you have multiple jobs or a working spouse. Understanding who pays and at what point matters because it affects your take-home pay and, later, what you have already paid into the system.

Key Takeaways

  • Most employees pay 1.45 percent of all wages in Medicare tax, with no income cap, while employers match that amount.
  • Self-employed workers pay 2.9 percent Medicare tax on net earnings from self-employment, calculated on Schedule SE.
  • An additional 0.9 percent Medicare tax applies to wages above $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately.
  • Members of certain religious groups, some federal employees hired before 1984, and nonresident aliens on specific visas are exempt from Medicare tax.
  • If you work multiple jobs or have a spouse who works, you may owe additional Medicare tax even if neither job alone crosses the threshold.

How Medicare tax works for W-2 employees

If you receive a W-2 form from an employer, you pay 1.45 percent of your gross wages in Medicare tax. Your employer withholds this from your paycheck and sends it to the IRS along with a matching 1.45 percent contribution. Unlike Social Security tax, which stops once you hit an annual earnings cap, Medicare tax has no ceiling — you pay it on every dollar you earn, no matter how high your income goes.

Your employer is responsible for calculating and withholding the correct amount. You can see it listed separately on your pay stub as "Medicare" or "Med Tax." If you work for multiple employers in the same year, each one withholds Medicare tax independently, which can matter when the additional Medicare tax threshold comes into play.

Self-employed workers and the full Medicare tax burden

When you are self-employed — working as a sole proprietor, partner, or independent contractor — you pay both the employee and employer share of Medicare tax yourself. That means 2.9 percent of your net self-employment income, calculated on IRS Schedule SE. You then deduct half of what you paid as a business expense on your tax return, which reduces your taxable income slightly.

Net self-employment income is not the same as gross revenue. You subtract business expenses, depreciation, and other deductions before calculating the tax. Many self-employed people underestimate this obligation and are surprised when they file their return or receive a quarterly estimated tax bill. If your net self-employment income is less than $400 in a year, you do not owe self-employment tax at all.

The additional Medicare tax threshold and how it applies

Once your income crosses a certain level, you owe an extra 0.9 percent Medicare tax on the amount above that threshold. For 2024, the thresholds are $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married people filing separately. These thresholds do not adjust for inflation, so more people hit them each year.

The additional tax applies to wages, self-employment income, and certain other income combined. If you are married filing jointly and you and your spouse earn $130,000 and $135,000 respectively, your combined income is $265,000 — which is $15,000 over the $250,000 threshold. You owe the additional 0.9 percent on that $15,000. If you work two jobs, the withholding from each employer is calculated separately, which can mean you overpay and need to claim a refund when you file your return.

Who does not pay Medicare tax

Members of certain religious groups that conscientiously object to accepting public insurance benefits can request an exemption from Medicare tax. This includes some Amish and Mennonite communities. You must file Form 4029 with the IRS and meet strict criteria — the exemption is not automatic and is rarely granted.

Some federal employees hired before April 1, 1986, are not covered by Medicare and do not pay Medicare tax. Instead, they are covered under the Civil Service Retirement System (CSRS). Employees hired after that date pay Medicare tax like other workers. Nonresident aliens on certain visa types — such as F-1 students or J-1 exchange visitors — are also exempt, though the rules are complex and depend on the specific visa category and how long the person has been in the United States.

What happens if you overpay Medicare tax

If you work multiple jobs and your combined wages cross the additional Medicare tax threshold, you may have overpaid throughout the year. Each employer withholds the additional 0.9 percent only on wages paid by that employer, not on your total income across all jobs. When you file your tax return, you can claim a refund for the overpayment.

For example, if you earned $150,000 at Job A and $100,000 at Job B, and you are single, Job A withheld additional Medicare tax on $0 (since $150,000 is below the $200,000 threshold), and Job B withheld it on $0 as well. But your combined income of $250,000 means you owe the additional tax on $50,000. You would need to pay the difference when you file, or if you already paid it through one job, you would receive a refund.

Medicare tax and your future benefits

Medicare tax you pay now goes into the Hospital Insurance Trust Fund, which covers Part A benefits — hospital stays, skilled nursing, hospice, and home health care. The amount you paid does not determine your benefit amount the way Social Security does. Instead, Part A is available to anyone 65 or older who has worked and paid Medicare tax for at least 10 years (40 quarters), regardless of how much they paid.

If you did not work long enough to may have access to for Part A without a premium, you can still buy in by paying a monthly premium. The premium amount depends on how many quarters of coverage you have. Understanding your Medicare tax history matters when you turn 65, because you will need to show your work record to confirm you meet the may be able to access requirement.

Frequently Asked Questions

Do I pay Medicare tax on tips?

Yes. Tips are considered wages and are subject to Medicare tax. Your employer should include reported tips in your W-2 wages, and Medicare tax is withheld on that amount. If you do not report tips to your employer, you are still required to pay Medicare tax on them when you file your return.

What if I work for a nonprofit or government employer?

Most nonprofit and government employees pay Medicare tax the same way as private sector workers — 1.45 percent withheld from their paycheck. The main exception is federal employees hired before April 1, 1986, who are covered under CSRS instead. State and local government employees hired after 1986 also pay Medicare tax.

Can I opt out of paying Medicare tax?

No, unless you may have access to for a specific exemption. Religious objection exemptions exist but are rare and require IRS approval. Most workers cannot choose to stop paying Medicare tax — it is withheld automatically by employers or paid by self-employed workers as part of their tax obligation.

Does Medicare tax explore to retirement account contributions?

No. Contributions to traditional 401(k)s and similar plans reduce your taxable income but do not reduce Medicare tax. Medicare tax is calculated on your gross wages before any pre-tax deductions. Roth contributions, which are made after tax, also do not affect Medicare tax.

What if I am a permanent resident but not a U.S. citizen?

Permanent residents (green card holders) pay Medicare tax on wages and self-employment income just like U.S. citizens. The exemption applies only to nonresident aliens on certain temporary visas. Your immigration status does not change your Medicare tax obligation once you are authorized to work in the United States.