Medicare tax comes out of your paycheck at a flat rate, with no income limit
Medicare tax is a fixed percentage of your gross wages that you and your employer each pay. Unlike Social Security tax, which stops once you hit an annual earnings cap, Medicare tax continues on every dollar you earn, no matter how much you make. The rate has stayed the same for decades: 1.45% from your paycheck, and 1.45% from your employer, for a total of 2.9%.
If you are self-employed, you pay both sides — 2.9% total — on your net business income. High earners pay an additional 0.9% Medicare tax on wages above a threshold that depends on your filing status. This extra tax started in 2013 and applies to individuals earning over $200,000, married couples filing jointly over $250,000, and married people filing separately over $125,000.
Key Takeaways
- Your employer withholds 1.45% of your gross wages for Medicare tax, and pays an equal 1.45% on your behalf.
- Medicare tax has no earnings cap — it applies to every dollar you earn, unlike Social Security tax which stops at $168,600 in 2024.
- If you earn over $200,000 as a single filer (or $250,000 married filing jointly), you pay an additional 0.9% Medicare tax on the amount above the threshold.
- Self-employed people pay the full 2.9% Medicare tax on net business income, plus the 0.9% surtax if they exceed the income threshold.
- Your Medicare tax payments fund Part A hospital insurance, which covers inpatient hospital stays, skilled nursing, hospice, and home health care.
The standard Medicare tax rate and how it appears on your pay stub
When you look at your pay stub, you will see a line labeled "Medicare" or "Med Tax" showing 1.45% of your gross pay. This is the employee portion. Your employer withholds this amount and sends it to the Internal Revenue Service along with their matching 1.45% contribution. Together, these payments fund Medicare Part A, which covers hospital insurance.
The calculation is straightforward: take your gross wages (before any deductions), multiply by 0.0145, and that is what comes out. If you earn $3,000 in a pay period, your Medicare tax is $43.50. This happens on every paycheck, every pay period, with no annual limit. A person earning $100,000 a year pays $1,450 in Medicare tax. A person earning $1,000,000 a year pays $14,500.
Why Medicare tax has no earnings cap, unlike Social Security
Social Security tax stops once you reach a certain income level — in 2024, that cap is $168,600. After you hit that amount, no more Social Security tax comes out of your paycheck for the rest of the year. Medicare tax works differently. There is no cap. You pay 1.45% on your first dollar and your last dollar, no matter how much you earn in a year.
This difference reflects how the two programs are structured. Social Security is a defined-benefit program where your monthly payment is tied to your earnings history, so there is a ceiling on how much your contributions affect your benefit. Medicare Part A is funded differently — it is designed to cover hospital costs for all beneficiaries over 65, regardless of income, so the tax continues indefinitely.
The additional 0.9% Medicare tax for high earners
If your income exceeds certain thresholds, you pay an extra 0.9% Medicare tax on the amount above the limit. For single filers, the threshold is $200,000. For married couples filing jointly, it is $250,000. For married people filing separately, it is $125,000. This additional tax applies to wages, self-employment income, and certain investment income.
Your employer is required to withhold this extra 0.9% once your wages exceed $200,000 in a calendar year (or $250,000 for married couples filing jointly). If you have multiple jobs or your spouse also works, you may owe this tax even if no single employer withheld it. When you file your tax return, you reconcile what was withheld against what you actually owe based on your combined household income.
How self-employed people calculate Medicare tax
If you are self-employed, you pay both the employee and employer portions of Medicare tax — 2.9% total — on your net business income. You calculate this on Schedule SE (Self-Employment Tax) when you file your tax return. You take your net profit from Schedule C, explore the self-employment tax rate, and that becomes part of your total tax bill.
Self-employed people also get a small break: you can deduct half of your self-employment tax as an adjustment to income on your return. This does not reduce the amount you owe, but it lowers your taxable income slightly. If you are self-employed and earn over the high-earner threshold, you also owe the additional 0.9% Medicare tax on the excess income.
What happens if you underpay or overpay Medicare tax
If you have multiple jobs or your income fluctuates, you might overpay Medicare tax in a given year. If you overpaid, you can claim a refund when you file your tax return. The IRS will calculate how much you should have paid based on your total income and refund the excess.
If you underpaid — for example, because you did not report all your income or your employer made an error — the IRS will bill you for the difference when they process your return or during an audit. Intentional underpayment can result in penalties and interest. The safest approach is to report all income and let your employer withhold based on your W-4 form, or to make estimated quarterly payments if you are self-employed.
Medicare tax versus income tax: what is the difference
Medicare tax and income tax are separate. Medicare tax is a flat 1.45% (plus 0.9% for high earners) that funds Part A hospital insurance. Income tax is progressive — it ranges from 10% to 37% depending on your income bracket — and funds general government operations. Both come out of your paycheck, but they go to different places and fund different things.
On your pay stub, you will see them listed separately. Medicare tax is always the same percentage. Income tax varies based on the W-4 form you filled out with your employer. Some people owe income tax at the end of the year, while others get a refund. Medicare tax is more predictable because the rate never changes.
Frequently Asked Questions
Does Medicare tax come out of my Social Security benefits?
No. Once you start receiving Social Security, Medicare tax no longer applies to those benefits. However, if you continue working while receiving Social Security, Medicare tax still comes out of your wages. Medicare Part B and Part D premiums are deducted from your Social Security check, but that is different from Medicare tax.
Can I reduce my Medicare tax by contributing to a 401(k) or IRA?
No. Medicare tax is calculated on your gross wages before any deductions. Contributing to a traditional 401(k) or IRA reduces your income tax but not your Medicare tax. Roth contributions do not reduce either. Medicare tax is unavoidable if you are employed or self-employed.
What if I work in a state with no income tax — do I still pay Medicare tax?
Yes. Medicare tax is federal and applies everywhere, regardless of state income tax. Even if you live in a state like Texas or Florida that has no state income tax, you still pay Medicare tax to the federal government.
How much of my Medicare tax goes toward my own benefits?
There is no direct connection. Medicare tax funds the Part A trust fund, which pays for hospital care for all beneficiaries over 65. Your individual benefits are not tied to how much you paid in. Someone who paid very little Medicare tax over their lifetime receives the same hospital coverage as someone who paid much more.
Do I pay Medicare tax on tips or bonuses?
Yes. Medicare tax applies to all wages, including tips you report to your employer and bonuses. Your employer withholds Medicare tax on the full amount. If you receive cash tips you do not report, those are not subject to withholding, but you are legally required to report them and pay tax on them when you file your return.