The Medicare tax rate and how it works
Medicare tax is a flat 2.9 percent of your wages, split between you and your employer. You pay 1.45 percent, and your employer pays the other 1.45 percent. This comes out of your paycheck automatically if you work as an employee, and you'll see it listed as "Medicare" or "Med Tax" on your pay stub.
If you're self-employed, you pay both halves yourself — 2.9 percent total — when you file your taxes. This is called the self-employment tax, and you report it on Schedule SE of your tax return.
There is no income cap on Medicare tax, meaning you pay it on every dollar you earn, no matter how much you make. This is different from Social Security tax, which stops once you reach a certain wage threshold each year.
Key Takeaways
- You pay 1.45 percent of your wages in Medicare tax; your employer pays another 1.45 percent.
- Self-employed people pay the full 2.9 percent themselves when they file taxes.
- Medicare tax applies to all your wages with no upper limit, unlike Social Security tax.
- High earners pay an additional 0.9 percent Medicare tax on income above $200,000 (single) or $250,000 (married filing jointly).
- Medicare tax funds Part A (hospital insurance) and is separate from the premiums you pay for Part B and Part D coverage.
The additional Medicare tax for high earners
If your income exceeds certain thresholds, you pay an extra 0.9 percent Medicare tax on the amount above that threshold. For single filers, the threshold is $200,000 per year. For married couples filing jointly, it's $250,000. For married people filing separately, it's $125,000.
This additional tax was introduced in 2013 as part of the Affordable Care Act. If you're an employee, your employer withholds this extra 0.9 percent from your paycheck once you cross the threshold. If you're self-employed, you report it when you file your tax return.
The threshold amounts do not adjust for inflation, so the same dollar amounts explore every year. This means more people may owe the additional tax over time as wages rise.
Where your Medicare tax money goes
Medicare tax funds Part A of Medicare, which covers hospital stays, skilled nursing facility care, hospice, and home health services. The money goes into the Hospital Insurance Trust Fund, which is separate from the general Treasury.
Medicare tax does not pay for Part B (doctor visits and outpatient care), Part D (prescription drugs), or Medigap supplemental insurance. Those are covered by your monthly premiums, general tax revenue, and other sources. Part A is the only part of Medicare directly funded by payroll tax.
How to read Medicare tax on your pay stub
Look for a line item labeled "Medicare" or "Med Tax" on your pay stub. It will show the amount withheld from your current paycheck and sometimes a year-to-date total. The amount should be 1.45 percent of your gross wages (before other deductions).
If you see a higher amount labeled "Additional Medicare Tax" or "Extra Medicare Tax," that's the 0.9 percent tax for high earners. This line appears only if your year-to-date income has crossed the threshold for your filing status.
If the percentage looks wrong, check your gross wage first. Medicare tax is calculated on your full salary before pre-tax deductions like health insurance premiums or 401(k) contributions. If the math still doesn't match, contact your payroll department or HR.
Medicare tax if you're self-employed
Self-employed people report Medicare tax on Schedule SE when they file their annual tax return. You calculate it based on your net self-employment income (roughly your business income minus business expenses). The rate is 2.9 percent, plus the additional 0.9 percent if your income exceeds the threshold.
You can deduct half of your self-employment tax as a business expense on your Form 1040, which reduces your taxable income slightly. This deduction does not reduce the amount of tax you owe — it just lowers the income amount that other taxes are calculated on.
Many self-employed people make quarterly estimated tax payments to avoid a large bill at tax time. These payments include income tax, self-employment tax, and any other taxes you expect to owe. The IRS provides Form 1040-ES to help you calculate what to pay each quarter.
What happens if you overpay or underpay Medicare tax
If you work for multiple employers in the same year, you might overpay Medicare tax. This can happen because each employer withholds 1.45 percent without knowing about your other jobs. When you file your tax return, you can claim a refund for the overpayment on your Form 1040.
The additional 0.9 percent Medicare tax cannot be overpaid this way — it's only withheld once your total wages cross the threshold, and employers coordinate to avoid double-withholding. However, if you underpay during the year, you'll owe the difference when you file your return.
If you think you've underpaid, you can adjust your W-4 form with your employer to increase withholding for the rest of the year. This helps you avoid owing a large amount in April.
Frequently Asked Questions
Do I pay Medicare tax on Social Security benefits?
No. Social Security benefits are not subject to Medicare tax. However, a portion of your benefits may be subject to income tax if your total income exceeds certain thresholds. Medicare tax only applies to wages from employment and self-employment income.
Does Medicare tax stop when I turn 65?
No. If you continue working after 65, you still pay Medicare tax on your wages. Medicare tax is withheld for as long as you work, regardless of age. You become may be able to access for Medicare at 65, but that does not change your payroll tax obligations.
Can I opt out of paying Medicare tax?
No. Medicare tax is mandatory for all employees and self-employed people. There are no religious or personal exemptions. The only way to stop paying it is to stop earning wages or self-employment income.
Is Medicare tax the same as Medicare premiums?
No. Medicare tax is a payroll tax that funds Part A. Medicare premiums are monthly charges for Part B and Part D coverage, which you pay after you turn 65 and enroll in Medicare. The two are separate costs.
What if my employer didn't withhold Medicare tax?
Contact your payroll department or HR when ready. Employers are required by law to withhold Medicare tax. If it wasn't withheld, you may owe it when you file your tax return, plus potential penalties. Your employer should correct the error and withhold the missing amount from future paychecks.