What Medicare tax is and how much comes out
Medicare tax is a payroll tax that funds the Medicare program. Your employer withholds it directly from your paycheck, and you pay it on every dollar you earn — there is no income limit that stops the withholding, unlike Social Security tax. The rate is 2.9 percent of your gross wages: your employer withholds 1.45 percent, and you pay 1.45 percent.
If you are self-employed, you pay both halves yourself, for a total of 2.9 percent. However, self-employed people can deduct half of what they pay when they file taxes, which slightly reduces the actual cost to you.
There is an additional Medicare tax of 0.9 percent that applies only if your income exceeds a certain threshold. For 2024, that threshold is $200,000 for single filers and $250,000 for married couples filing jointly. If you cross that line, your employer withholds the extra 0.9 percent on wages above the threshold. Self-employed people calculate and pay this themselves when they file taxes.
Key Takeaways
- The standard Medicare tax rate is 2.9 percent of your gross wages, split evenly between you and your employer at 1.45 percent each.
- Medicare tax has no income cap — you pay it on every dollar you earn, unlike Social Security tax which stops after you reach a certain annual amount.
- An additional 0.9 percent Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly) in 2024.
- Self-employed workers pay the full 2.9 percent themselves but can deduct half of it on their tax return.
How the standard 2.9 percent is calculated
The calculation is straightforward. Take your gross pay for the pay period — the amount before any deductions — and multiply it by 0.0145. That is your employee share. Your employer withholds that amount and also pays 1.45 percent on their side.
For example, if you earn $3,000 in a pay period, your Medicare tax is $3,000 × 0.0145 = $43.50. Your employer also pays $43.50. The total Medicare tax on that $3,000 is $87, but you only see the $43.50 deducted from your check.
This calculation happens on every paycheck, every pay period, with no exceptions. Bonuses, overtime, and commissions are all subject to Medicare tax at the same 1.45 percent rate.
When the additional 0.9 percent tax kicks in
The additional Medicare tax applies to high earners. In 2024, if you are single and your wages exceed $200,000, you owe an extra 0.9 percent on the amount over $200,000. If you are married and filing jointly, the threshold is $250,000. If you are married and filing separately, it is $125,000.
Your employer is required to withhold this extra tax once your year-to-date wages cross the threshold. However, employers sometimes make mistakes with the withholding, especially if you have changed jobs during the year or have a spouse who also works. If too little was withheld, you will owe the difference when you file your tax return. If too much was withheld, you will receive a refund.
Self-employed people do not have an employer to withhold this tax, so they calculate it themselves when they file their annual tax return and pay it as part of their self-employment tax.
How self-employed workers calculate Medicare tax
If you are self-employed, you pay both the employee and employer share of Medicare tax — the full 2.9 percent. You calculate this on your net self-employment income, which is your business income minus business expenses.
You report this on Schedule SE (Self-Employment Tax) when you file your federal tax return. The form walks you through the calculation step by step. Once you have your net self-employment income, you multiply it by 0.9235 (this accounts for the employer-side deduction you are allowed to take), then multiply that result by 0.153 to get your total self-employment tax, which includes both Social Security and Medicare portions.
The Medicare portion of that self-employment tax is 2.9 percent of your net income. You can deduct half of your total self-employment tax when you calculate your adjusted gross income, which lowers your taxable income slightly.
What happens if you have multiple jobs
If you work more than one job, each employer withholds Medicare tax on the wages they pay you. There is no coordination between employers, so if your combined income from all jobs is high, you might have too little withheld early in the year and then too much later — or vice versa.
The additional 0.9 percent Medicare tax can create confusion when you have multiple jobs. Each employer withholds it based only on what they pay you, not on your total income from all sources. This means you might have too much withheld, too little, or the right amount, depending on how your income is split across employers. When you file your tax return, you reconcile what was actually withheld against what you actually owe based on your total income.
If you expect this problem, you can ask your employer to withhold extra Medicare tax on your W-4 form to avoid owing money at tax time.
Medicare tax versus Social Security tax
Medicare tax and Social Security tax are separate payroll taxes, and they work differently. Social Security tax is 6.2 percent (employee share), but it only applies to the first $168,600 of your annual wages in 2024 — once you earn that much, no more Social Security tax is withheld. Medicare tax, by contrast, applies to every dollar you earn with no cap.
This is why high earners pay a much larger percentage of their income in Medicare tax than in Social Security tax. A person earning $500,000 a year pays Social Security tax on only the first $168,600, but pays Medicare tax on all $500,000 (plus the additional 0.9 percent on the amount over the threshold).
Both taxes fund different programs: Social Security tax funds retirement, disability, and survivor benefits, while Medicare tax funds hospital insurance (Part A) and helps fund other Medicare benefits.
Checking your Medicare tax withholding on your pay stub
Your pay stub shows exactly how much Medicare tax was withheld. Look for a line labeled "Medicare" or "Med Tax." It should show 1.45 percent of your gross pay for that period. If you earn over the threshold for additional Medicare tax, there may be a separate line for that 0.9 percent withholding.
You can add up all the Medicare tax withheld across all your paychecks for the year by looking at your W-2 form, which your employer sends you by January 31. Box 6 on the W-2 shows total Medicare tax withheld. Box 7 shows Social Security tax withheld, so you can see both side by side.
If the amount on your W-2 seems wrong, contact your employer's payroll department. They can recalculate and issue a corrected W-2 if needed. Keep your pay stubs so you have a record of what was withheld each pay period.
Frequently Asked Questions
Does Medicare tax stop after I reach a certain income?
No. Unlike Social Security tax, Medicare tax has no income cap. You pay 1.45 percent on every dollar you earn, no matter how much you make. If your income exceeds $200,000 (single) or $250,000 (married filing jointly), you also pay an additional 0.9 percent on the amount over the threshold.
Can I opt out of paying Medicare tax?
No. Medicare tax is mandatory for all employees and self-employed people. There are no exceptions based on age, health status, or whether you plan to use Medicare benefits.
What if my employer withheld the wrong amount of Medicare tax?
Check your W-2 form, which shows total Medicare tax withheld. If the amount is incorrect, contact your employer's payroll department and ask them to issue a corrected W-2. If the error is not caught until after you file your tax return, you can file an amended return to claim a refund or pay what you owe.
Do I pay Medicare tax on tips?
Yes. Tips are considered wages and are subject to Medicare tax at the same 1.45 percent rate. Your employer should withhold Medicare tax on tips you report to them.
How is Medicare tax different from Medicare premiums?
Medicare tax is the payroll tax you pay while working. Medicare premiums are what you pay each month once you are enrolled in Medicare, usually starting at age 65. The tax funds the program; the premiums pay for your coverage.