Not everyone pays Medicare tax at the same rate, and some people don't pay it at all

Medicare tax comes out of most paychecks, but the rules about who pays, how much, and when are different depending on how you work and how much you earn. If you're employed by a company, you and your employer each pay 1.45% of your wages. If you're self-employed, you pay both sides — 2.9% total. But there are people who pay nothing, people who pay extra, and people whose income is partly or fully exempt.

The key is understanding your work status and income level. A W-2 employee has a straightforward situation. A self-employed person or contractor needs to track it themselves. A government worker, minister, or someone with very low income may not pay at all. And if you earn over a certain threshold, you'll pay an additional 0.9% on the amount above that line.

Key Takeaways

  • Employees and employers each pay 1.45% of wages in Medicare tax; self-employed people pay 2.9% on net earnings.
  • An additional 0.9% Medicare tax applies to wages over $200,000 (single filers) or $250,000 (married filing jointly), and your employer withholds it automatically.
  • Federal employees, railroad workers, and some state and local government workers pay into their own retirement systems instead of Medicare tax.
  • Nonresident aliens, certain religious groups, and people earning below the threshold for self-employment tax may owe nothing.
  • You can see your Medicare tax withheld on your pay stub and on your annual W-2 form as "Medicare" or "Med Tax."

How Medicare tax works for regular employees

If you receive a W-2 at the end of the year, your employer withholds Medicare tax from every paycheck. You'll see it listed on your pay stub. Your employer sends that money to the IRS along with an equal amount they pay on your behalf. Neither you nor your employer can opt out — it's automatic and mandatory.

The 1.45% rate applies to all your wages with no upper limit. Unlike Social Security tax, which stops after you earn a certain amount each year, Medicare tax keeps going no matter how much you make. This is why high earners end up paying the additional 0.9% tax on top of the standard 1.45%.

Self-employed people and Medicare tax

If you're self-employed — meaning you run your own business or work as an independent contractor — you pay both the employee and employer share of Medicare tax. That's 2.9% of your net self-employment income. You calculate this on Schedule SE when you file your taxes, and you pay it along with your income tax return.

You don't withhold it from each paycheck the way an employer does. Instead, you may make quarterly estimated tax payments, or you settle the full amount when you file. The IRS allows you to deduct half of your self-employment tax as a business expense on your tax return, which reduces your taxable income slightly.

The additional 0.9% Medicare tax for higher earners

If your wages or self-employment income exceed certain thresholds, you owe an extra 0.9% Medicare tax on the amount above that line. For 2024, the thresholds are $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married people filing separately.

If you're an employee, your employer withholds this automatically once you cross the threshold. If you're self-employed, you calculate it yourself on your tax return. Unlike the standard 1.45% Medicare tax, you cannot deduct this additional 0.9% as a business expense.

The threshold amounts do not change year to year with inflation — they stay fixed at the levels set when this tax began in 2013. This means more people reach the threshold each year as wages rise.

Who does not pay Medicare tax

Federal employees hired before 1984 do not pay Medicare tax. Instead, they pay into the Civil Service Retirement System (CSRS). Federal employees hired in 1984 or later pay both Social Security and Medicare tax.

Railroad workers covered by the Railroad Retirement Tax Act pay into that system instead of Medicare. Some state and local government workers who are covered by their own pension system may not pay Medicare tax, though many do pay both. Ministers and members of certain religious groups can request exemption if they take a vow of poverty or if their church provides for their needs.

Nonresident aliens working in the United States on certain visa types (such as F-1 student visas or J-1 exchange visitor visas) are generally exempt from Medicare tax on wages earned in the U.S., though the rules vary by visa category.

Very low income and Medicare tax

If you're self-employed and your net earnings are below $400 in a year, you don't owe self-employment tax, which includes Medicare tax. However, if you're a regular employee, you pay Medicare tax on all wages no matter how small — there is no minimum threshold for employee Medicare tax.

Some people work part-time or seasonally and earn very little. If you're an employee, even $1 in wages triggers the 1.45% Medicare tax withholding. If you're self-employed, you only owe self-employment tax (including Medicare) if net earnings reach $400.

How to check your Medicare tax on your pay stub and tax return

Your pay stub shows Medicare tax withheld under a line labeled "Medicare," "Med Tax," or sometimes "HI" (for Hospital Insurance, which is another name for Medicare). Compare this to your gross pay to verify the rate is correct — it should be 1.45% for standard withholding, or 1.45% plus 0.9% if you've crossed the high-income threshold.

At the end of the year, your employer sends you a W-2 form. Box 5 shows your Medicare wages, and Box 6 shows Medicare tax withheld. If you're self-employed, you'll calculate Medicare tax on Schedule SE and report it on your Form 1040. Keep these documents for your records and to verify that the right amount was withheld or paid.

Frequently Asked Questions

Can I opt out of paying Medicare tax?

No, not if you're an employee or self-employed. Medicare tax is mandatory for nearly all workers. The only exceptions are specific groups like federal employees hired before 1984, railroad workers, certain religious groups with approved exemptions, and some nonresident aliens on specific visa types. If you think you might may have access to for an exemption, contact the IRS or a tax professional.

What happens if my employer doesn't withhold Medicare tax?

You're still responsible for paying it. If your employer fails to withhold, you'll owe the full amount when you file your tax return. Report the discrepancy to the IRS and contact your employer to correct it. Keep your pay stubs as proof of what was or wasn't withheld.

Do I pay Medicare tax on all my income?

If you're an employee, yes — Medicare tax applies to all wages with no upper limit. If you're self-employed, it applies to your net self-employment income above $400. Investment income, rental income, and other passive income sources do not trigger Medicare tax, though they may be subject to other taxes.

Does Medicare tax go into a separate account for me?

No. Medicare tax goes into a general fund that pays for Medicare benefits for all beneficiaries, not into an individual account in your name. When you turn 65 and become may be able to access for Medicare, you draw from this shared pool based on your may be able to access, not based on how much you personally paid in.

What's the difference between Medicare tax and Social Security tax?

Medicare tax is 1.45% (or 2.35% with the additional tax) and has no wage cap — you pay it on all earnings. Social Security tax is 6.2% for employees and applies only to wages up to a certain limit, which changes each year. Both are withheld from paychecks, but they fund different programs.