Medicare tax withholding: the basic rate
Medicare tax is withheld from your paycheck at a flat rate of 1.45% of your gross wages. Your employer withholds this amount and sends it to the IRS on your behalf. This is separate from Social Security tax, which is 6.2%, and from federal income tax withholding.
If you are self-employed, you pay both the employee and employer portions of Medicare tax — a total of 2.9% — when you file your taxes. This is called the self-employment tax.
Key Takeaways
- Medicare tax is withheld at 1.45% of your gross wages if you are an employee, and your employer matches this amount.
- An additional 0.9% Medicare tax applies to wages above $200,000 per year for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately.
- Self-employed people pay 2.9% total Medicare tax (both employee and employer portions) on net earnings from self-employment.
- Medicare tax has no income cap — you pay it on all wages, unlike Social Security tax which stops after you earn a certain amount each year.
The additional Medicare tax on higher incomes
If your wages exceed certain thresholds, you owe an additional 0.9% Medicare tax. This extra tax applies only to income above the threshold, not to your entire paycheck.
The thresholds depend on your filing status. For single filers, the threshold is $200,000 per year. For married couples filing jointly, it is $250,000. For married couples filing separately, it is $125,000. Your employer should withhold this additional 0.9% once your wages cross the threshold in a given year.
If you have income from multiple jobs, your employers may not know about your other earnings, so they may not withhold the additional tax. In that case, you may owe it when you file your tax return. You can adjust your withholding by filing a new W-4 form with your employer.
How to find your Medicare tax withholding on your pay stub
Your pay stub shows Medicare tax as a separate line item, usually labeled "Medicare" or "Med Tax." It appears in the deductions section alongside federal income tax and Social Security tax. The amount should be 1.45% of your gross pay, unless you earn above the threshold for the additional 0.9% tax.
If you do not see Medicare tax listed on your pay stub, ask your payroll department. All employees except certain railroad workers and some government employees must have Medicare tax withheld. If your employer is not withholding it, that is a problem to report to your employer and possibly to the IRS.
Medicare tax and self-employment income
If you are self-employed, you calculate Medicare tax on your net self-employment income — your business income minus business expenses. You pay 2.9% in Medicare tax, plus an additional 0.9% if your net self-employment income is above the same thresholds as wage earners ($200,000 for single filers, $250,000 for married filing jointly).
You pay self-employment tax when you file your annual tax return using Schedule SE. You can deduct half of your self-employment tax as an adjustment to income on your tax return, which lowers your taxable income slightly.
Medicare tax and retirement income
Medicare tax does not explore to most retirement income. If you receive a pension, distributions from a 401(k) or IRA, or Social Security benefits, Medicare tax is not withheld from those payments. However, if you continue to work part-time or start a new job after you retire, Medicare tax will be withheld from those wages.
If you have investment income — such as interest, dividends, or capital gains — Medicare tax does not explore to that either. The 3.8% Net Investment Income Tax is a separate tax that may explore to certain investment income, but it is different from Medicare tax.
What happens to the Medicare tax you pay
The Medicare tax you pay goes into the Medicare Hospital Insurance Trust Fund, which pays for Part A benefits — hospital stays, skilled nursing facility care, hospice, and home health services. This is different from the Social Security tax you pay, which funds Social Security retirement, disability, and survivor benefits.
Medicare tax has no annual cap. You pay 1.45% on every dollar you earn, no matter how much you make in a year. Social Security tax, by contrast, stops once you reach a certain earnings level each year (that level changes annually).
Checking your Medicare tax record
You can view your lifetime Medicare tax contributions by creating an account on ssa.gov and viewing your Social Security Statement. This statement shows your earnings history and the taxes withheld, including Medicare tax. You can also request a paper statement by mail if you do not have internet access.
Review your statement every few years to make sure your earnings are recorded correctly. If you spot an error, contact the Social Security Administration to correct it. Errors in your earnings record can affect your Medicare premiums later, since some premiums are based on your income from two years prior.
Frequently Asked Questions
Why do I pay Medicare tax if I am already on Medicare?
Medicare tax funds the program for everyone, not just current beneficiaries. Even after you turn 65 and enroll in Medicare, if you continue to work, you still pay Medicare tax on your wages. This helps sustain the program for future retirees.
Can I opt out of Medicare tax withholding?
No. Medicare tax withholding is required by law for all employees and self-employed people. There are no exemptions based on religion or personal belief, unlike some Social Security exemptions that applied historically to certain groups.
What if my employer did not withhold Medicare tax?
Contact your payroll department and ask them to correct it. If they refuse or if you believe they are deliberately not withholding, you can report it to the IRS using Form 13909 (Whistleblower Submission). You may also owe the tax when you file your return if it was not withheld during the year.
Does Medicare tax withholding change when I turn 65?
No. Your Medicare tax withholding rate stays the same whether you are 25 or 75. If you are still working and earning wages, 1.45% continues to be withheld (plus the additional 0.9% if your income is above the threshold). Turning 65 and enrolling in Medicare does not change your payroll withholding.
How is Medicare tax different from Medicare premiums?
Medicare tax is what you pay while you are working; it funds the program. Medicare premiums are what you pay after you enroll in Medicare to cover Part B (doctor visits) and Part D (prescription drugs). Your premiums may be higher if your income was above certain levels two years prior, but that is a separate calculation from the tax withheld from your paycheck.