The Medicare tax rate is 2.9% of your wages
Medicare tax comes out of your paycheck in two parts: you pay 1.45% and your employer pays 1.45%, for a total of 2.9%. If you are self-employed, you pay both parts yourself — 2.9% total. There is no income limit on Medicare tax, so you pay it on every dollar you earn, unlike Social Security tax which stops after you reach a certain wage threshold each year.
The 1.45% you see on your pay stub goes to Part A of Medicare, which covers hospital stays, skilled nursing care, and hospice. Your employer's matching 1.45% goes to the same fund. This is separate from income tax withholding and separate from Social Security tax.
Key Takeaways
- You pay 1.45% of your wages in Medicare tax, and your employer matches that amount.
- Self-employed workers pay the full 2.9% themselves, though they can deduct half of it on their tax return.
- Medicare tax applies to all your wages with no upper limit, unlike Social Security tax.
- An additional 0.9% Medicare tax applies to wages over a certain threshold if you earn high income.
- Medicare tax funds Part A coverage, which includes hospital and skilled nursing facility care.
The additional Medicare tax for higher earners
If you earn above a certain income threshold, you pay an extra 0.9% Medicare tax on the amount over that threshold. For 2024, the threshold is $200,000 for single filers and $250,000 for married couples filing jointly. This additional tax was added in 2013 as part of the Affordable Care Act.
Your employer withholds this extra 0.9% if your wages exceed the threshold at that job. If you have multiple jobs or if you are married and both spouses work, you may owe additional tax when you file your return, because each employer only knows about the wages they paid you. You can adjust your withholding with your employer if you expect to owe.
How Medicare tax appears on your pay stub
Look for a line labeled "Medicare" or "Med Tax" on your pay stub. It will show 1.45% of your gross wages for that pay period. If your total wages for the year are high enough to trigger the additional tax, you may see a separate line for "Additional Medicare Tax" or "Medicare Surtax" showing the extra 0.9%.
Your employer's portion does not appear on your pay stub — that is a cost to the employer that you do not see directly. But it is part of the total Medicare tax system that funds your Part A coverage when you turn 65.
Self-employed Medicare tax
If you are self-employed, you pay both the employee and employer portions of Medicare tax, totaling 2.9% of your net self-employment income. You calculate this on Schedule SE when you file your taxes. The good news is that you can deduct half of your self-employment tax on your tax return, which reduces your taxable income.
Self-employed workers also pay the additional 0.9% Medicare tax if their net self-employment income plus any wages from other jobs exceed the income thresholds. This is calculated on Form 8959 when you file.
What Medicare tax pays for
Your Medicare tax payments fund Part A of Medicare, which covers inpatient hospital care, care in a skilled nursing facility after a hospital stay, home health services, and hospice care. You do not pay a separate premium for Part A when you turn 65 if you or your spouse paid Medicare tax for at least 10 years (40 quarters).
Part A has a deductible and copayments, but those are separate from the tax you pay now. The tax you pay during your working years builds up the trust fund that pays these benefits decades later.
Medicare tax and your Social Security record
Medicare tax is tracked separately from Social Security tax on your earnings record at the Social Security Administration. You can view both on your Social Security Statement, which you can access online at ssa.gov. Your Medicare tax record is important because it determines whether you will have to pay a premium for Part A when you turn 65.
If you worked and paid Medicare tax for at least 10 years, you will not owe a Part A premium. If you have fewer than 10 years of Medicare tax payments, you will pay a monthly premium for Part A coverage, and the amount depends on how many quarters of coverage you have.
Frequently Asked Questions
Why do I pay Medicare tax if I am not on Medicare yet?
Medicare tax during your working years funds the Part A trust fund that pays for hospital and skilled nursing care when you and others turn 65. It is a pay-as-you-go system where current workers fund current retirees' care, and future workers will fund yours.
Can I stop paying Medicare tax at any age?
No. Medicare tax is withheld from your paycheck as long as you are employed, regardless of your age. Even if you are already on Medicare, you continue to pay Medicare tax on any wages you earn from employment.
What happens if I did not pay Medicare tax for 10 years?
You will still be covered by Medicare Part A when you turn 65, but you will pay a monthly premium for it. The premium amount depends on how many quarters of Medicare tax you paid. You can contact Social Security to find out your exact coverage status.
Is Medicare tax the same as the Medicare premium I pay in retirement?
No. Medicare tax is what you pay now from your paycheck. Part A premium is what you may pay monthly after you turn 65 if you do not have enough work history. Part B and Part D have their own premiums that are separate from both.
Do I pay Medicare tax on investment income or retirement account withdrawals?
No. Medicare tax only applies to wages from employment and self-employment income. It does not explore to investment income, interest, dividends, or withdrawals from retirement accounts like IRAs or 401(k)s.