What you pay in Medicare taxes depends on your income and employment status

Medicare is funded partly through payroll taxes that come out of your wages. If you work, you and your employer each pay a percentage of your earnings toward Medicare. If you're self-employed, you pay both portions yourself. The tax rate is the same for everyone — it doesn't change based on age or health — but the amount you actually pay depends on how much you earn.

The standard Medicare tax rate is 2.9 percent of your wages: 1.45 percent from you and 1.45 percent from your employer. If you're self-employed, you pay the full 2.9 percent yourself, though you can deduct half of it on your taxes. On top of this, there's an additional 0.9 percent Medicare tax on wages above a certain threshold, which only you pay — your employer doesn't match it.

Key Takeaways

  • The standard Medicare tax is 2.9 percent of your wages: 1.45 percent withheld from your paycheck and 1.45 percent paid by your employer.
  • If you earn more than $200,000 as a single filer (or $250,000 married filing jointly), you pay an additional 0.9 percent Medicare tax on the amount above that threshold.
  • Self-employed people pay the full 2.9 percent Medicare tax themselves, but can deduct half of it when filing taxes.
  • Medicare tax is withheld automatically from your paycheck; you don't have to do anything to pay it.

The standard 2.9 percent Medicare tax on all wages

Every worker in the United States pays 1.45 percent of their gross wages toward Medicare. Your employer withholds this from your paycheck automatically. At the same time, your employer pays an equal 1.45 percent on your behalf — this is a cost to them, not to you, though it comes from the same pool of money the company would otherwise use for wages.

This 2.9 percent combined rate has been the same since 1985. It applies to all wages and salaries, with no upper limit. Whether you earn $30,000 a year or $300,000, the 2.9 percent rate stays the same on every dollar.

When you see your pay stub, look for a line labeled "Medicare" or "Med Tax." The amount shown is the 1.45 percent withheld from your gross pay. You don't see the employer's 1.45 percent — that's paid separately — but it's part of your total compensation cost to your employer.

The additional 0.9 percent tax on higher incomes

If your wages exceed a certain amount in a single year, you pay an extra 0.9 percent Medicare tax on the amount over that threshold. This additional tax was added in 2013 as part of the Affordable Care Act. Unlike the standard 2.9 percent, your employer does not pay a matching portion of this extra tax — only you do.

The income thresholds are $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married people filing separately. These thresholds do not adjust for inflation, so they remain the same year to year. If you're single and earn $205,000, you pay the additional 0.9 percent on the $5,000 above $200,000.

Your employer is required to withhold this additional tax once your wages cross the threshold during the year. If you have multiple jobs or your spouse also works, you might owe more than what's withheld, and you'll settle the difference when you file your tax return.

How self-employed people pay Medicare tax

If you're self-employed, you pay both the employee and employer portions of Medicare tax — the full 2.9 percent. You also pay the additional 0.9 percent if your net self-employment income exceeds the same thresholds as wage earners ($200,000 single, $250,000 married filing jointly).

Self-employment tax is calculated on your net income — what you earn after business expenses — not your gross revenue. You pay it when you file your annual tax return using Schedule SE. The total self-employment tax includes Social Security tax (12.4 percent) and Medicare tax (2.9 percent plus the potential 0.9 percent surcharge).

The good news is that you can deduct half of your self-employment tax when you calculate your adjusted gross income. This reduces your taxable income and lowers your overall tax bill. For example, if you owe $2,900 in Medicare tax, you can deduct $1,450.

Real examples of what Medicare tax looks like on a paycheck

Example 1: A salaried employee earning $50,000 per year. Your Medicare tax is 1.45 percent of $50,000, which is $725 per year, or about $60 per month withheld from your paycheck. Your employer also pays $725. You don't owe the additional 0.9 percent because your income is below $200,000.

Example 2: A salaried employee earning $220,000 per year. Your standard Medicare tax is 1.45 percent of $220,000, which is $3,190 per year. You also owe the additional 0.9 percent on the $20,000 above $200,000, which is $180. Your total Medicare tax is $3,370 per year. Your employer pays $3,190 (the standard 1.45 percent only, not the surcharge).

Example 3: A self-employed person with net income of $80,000. You pay the full 2.9 percent Medicare tax: $2,320 per year. When you file your taxes, you can deduct half of this ($1,160), which lowers your taxable income. You don't owe the additional 0.9 percent because your income is below $200,000.

Medicare tax versus Medicare premiums and deductibles

Medicare tax is not the same as the premiums you pay when you turn 65 and enroll in Medicare. The payroll tax funds the Medicare program overall. The premiums are what you pay monthly to actually use Medicare coverage — Part B (doctor visits) and Part D (prescription drugs) have premiums, for instance.

Similarly, Medicare tax is separate from deductibles and copayments. The tax is withheld from your paycheck during your working years. Deductibles and copayments are what you pay out of pocket when you use healthcare services after you're enrolled in Medicare.

Understanding the difference matters because your Medicare tax payments during your career help you become may be able to access for Medicare at 65, but they don't determine how much you'll pay in premiums later. Your future premiums are based on your income at the time you enroll and your coverage choices.

Frequently Asked Questions

Why do I pay Medicare tax if I'm not on Medicare yet?

Medicare tax funds the program for current beneficiaries and builds your may be able to access for when you turn 65. You need 40 quarters of Medicare tax contributions (roughly 10 years of work) to be may be able to access for Medicare Part A (hospital insurance) without paying a premium. The tax is a shared responsibility: workers fund the system while they work, and retirees draw from it when they're older.

Can I avoid paying Medicare tax?

No. Medicare tax is mandatory for all employees and self-employed people. There are no exemptions based on age, health status, or religion. It's withheld automatically from paychecks, so you don't have a choice to opt out.

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

Your employer is legally required to withhold it. If they don't, you're still responsible for the tax, and you may owe it when you file your tax return. If you suspect your employer isn't withholding correctly, contact the IRS or your state tax authority.

Do I pay Medicare tax on retirement income or investment income?

No. Medicare tax applies only to wages from employment and self-employment income. Retirement account withdrawals, Social Security benefits, investment income, and pensions are not subject to Medicare tax. However, high earners may pay a separate 3.8 percent tax on investment income, which is different from Medicare tax.

If I work past 65, do I still pay Medicare tax?

Yes. As long as you're working and earning wages, you pay Medicare tax regardless of your age. Even if you're already on Medicare, your paycheck continues to have Medicare tax withheld. You don't stop paying until you stop working.