What Medicare tax costs you
Medicare tax is a payroll tax that funds Medicare. If you work, you and your employer each pay 1.45% of your wages. If you're self-employed, you pay both sides — 2.9% total. These percentages have not changed since 1985.
There is no income limit on Medicare tax. You pay it on every dollar you earn, unlike Social Security tax, which stops after you reach a certain annual income. This means higher earners pay more in total Medicare tax over their lifetime.
If you earned wages in 2024, you can see what you paid by looking at your pay stub or your annual W-2 form. The line item is usually labeled "Medicare" or "Med Tax." If you're self-employed, you report Medicare tax on Schedule SE when you file your taxes.
Key Takeaways
- Employees pay 1.45% of wages in Medicare tax, and employers pay another 1.45%.
- Self-employed people pay 2.9% because they cover both the employee and employer portions.
- Medicare tax applies to all wages with no upper income limit, unlike Social Security tax.
- Higher earners may pay an additional 0.9% Medicare tax on income above a threshold that depends on your filing status.
The extra Medicare tax for higher earners
If your income is above a certain level, you pay an additional 0.9% Medicare tax. This extra tax started in 2013 and applies only to wages above the threshold, not to your entire income.
The threshold depends on how you file your taxes. For single filers, it's $200,000 per year. For married couples filing jointly, it's $250,000. For married people filing separately, it's $125,000. If you're self-employed, the same thresholds explore to your net self-employment income.
Your employer withholds this extra tax automatically if your wages cross the threshold. If you're self-employed or have income from multiple jobs, you may owe it when you file your tax return. You can check your pay stub to see if this extra tax is being withheld.
How much you've paid over your working years
The total Medicare tax you've paid depends on how much you earned and for how long. Someone who worked full-time for 40 years at an average salary will have paid tens of thousands of dollars in Medicare tax combined with their employer's contribution.
You don't get a separate bill for Medicare tax — it comes out of your paycheck automatically. When you turn 65 and become may be able to access for Medicare, you don't pay the tax anymore (unless you continue working). The tax you paid during your working years helps fund the program you use in retirement.
If you want to see your lifetime Medicare tax contributions, you can create an account on ssa.gov and view your Social Security Statement. This statement shows your earnings history and the taxes withheld, including Medicare tax.
Medicare tax if you're still working after 65
If you keep working after you turn 65, you continue to pay Medicare tax on your wages. This is true even if you've already enrolled in Medicare. The tax rate stays the same: 1.45% for employees, 2.9% for self-employed workers, plus the extra 0.9% if your income is above the threshold.
Some people think they stop paying Medicare tax once they're on Medicare, but that's not how it works. The tax is tied to employment income, not to your Medicare status. You pay it as long as you earn wages or self-employment income.
Self-employed workers and Medicare tax
If you're self-employed, you pay Medicare tax on your net self-employment income — that is, your business income after deducting business expenses. You pay both the employee portion (1.45%) and the employer portion (1.45%), for a total of 2.9%.
You report this on Schedule SE when you file your federal tax return. The IRS provides a worksheet to help you calculate it. If your net self-employment income is above the threshold for the extra Medicare tax, you'll owe that 0.9% as well.
Self-employed workers can deduct half of their Medicare tax (the employer portion) when calculating their adjusted gross income. This is a small offset, but it's worth noting when you file your taxes.
What happens to the Medicare tax you pay
Medicare tax funds the Hospital Insurance Trust Fund, which pays for Part A benefits — hospital stays, skilled nursing care, hospice, and home health services. The tax does not fund Medicare Part B (doctor visits), Part D (prescription drugs), or Medigap plans.
The trust fund is separate from general tax revenue. Money you pay in Medicare tax goes directly to this fund, and benefits are paid out from it. In recent years, the trust fund has faced pressure because more people are retiring and living longer, while the ratio of workers to beneficiaries has shrunk.
Congress periodically reviews the trust fund's solvency. If you want to understand the long-term outlook for Medicare, the annual Trustees Report (published by the Centers for Medicare & Medicaid Services) explains the fund's status and projections.
Frequently Asked Questions
Do I get a refund of Medicare tax when I turn 65?
No. Medicare tax is not refundable. The money you paid during your working years goes into the Hospital Insurance Trust Fund and is used to pay benefits for current Medicare beneficiaries. You don't receive a lump sum or credit when you enroll in Medicare.
What if I didn't pay Medicare tax because I was exempt?
Some groups — mainly certain religious communities and some government employees hired before 1983 — are exempt from Medicare tax. If you were exempt, you won't have Medicare Part A coverage based on your work history. You can still purchase Part A at age 65 if you want it, but the premium will be higher than for people who paid the tax.
Can I reduce my Medicare tax by contributing to a retirement account?
No. Medicare tax is calculated on gross wages before any deductions. Contributing to a 401(k), IRA, or other retirement account does not lower the Medicare tax you owe. Social Security tax also applies to gross wages, but Medicare tax is separate and applies to all earnings.
Is Medicare tax the same in every state?
Yes. Medicare tax is a federal tax, so the rate is the same everywhere. Some states have additional state income taxes, but those are separate from Medicare tax. Your employer withholds Medicare tax the same way regardless of which state you work in.
What if I worked in another country — does that count toward Medicare?
It depends on the country and the tax treaty between that country and the United States. Some countries have agreements that allow work credits to transfer. If you worked abroad, contact the Social Security Administration to find out whether those earnings count toward your Medicare coverage.