The Medicare tax rate depends on whether you're employed, self-employed, or already retired

If you're working, you and your employer each pay 1.45% of your wages into Medicare Part A (hospital insurance). If you're self-employed, you pay both sides: 2.9% total. These percentages have been the same since 1985. On top of this, there's an additional 0.9% Medicare tax on wages above a certain threshold — $200,000 for single filers, $250,000 for married couples filing jointly. This extra tax started in 2013 and applies to both employees and self-employed workers.

If you're already receiving Social Security, Medicare taxes stop. You don't pay them on retirement income, investment income, or pensions. The tax only applies to earned income — wages from a job or net profit from self-employment.

Medicare Part B (medical insurance) and Part D (prescription drug coverage) are funded differently. You pay a monthly premium for these, which varies by income and changes each year. Part B premiums for 2024 start at $174.70 per month for most people, but higher earners pay more.

Key Takeaways

  • The standard Medicare tax is 1.45% from your paycheck and 1.45% from your employer, totaling 2.9% of your wages.
  • Self-employed workers pay the full 2.9% themselves, plus they can deduct half of it on their tax return.
  • An additional 0.9% Medicare tax applies to wages over $200,000 (single) or $250,000 (married filing jointly).
  • Once you start receiving Social Security or reach full retirement age, you stop paying Medicare payroll taxes on earned income.
  • Part B and Part D premiums are separate from payroll taxes and are based on your income level.

How the standard 1.45% Medicare tax works on your paycheck

When you work for an employer, 1.45% of your gross pay goes to Medicare Part A. Your employer matches this with another 1.45%. You see the employee portion deducted from your paycheck; your employer's share is a business expense they report separately. Together, these two payments fund hospital insurance for everyone on Medicare.

This 1.45% applies to all your wages with no upper limit — unlike Social Security tax, which stops after you earn a certain amount each year. So if you earn $50,000, you pay $725. If you earn $500,000, you pay $7,250. The rate stays the same no matter how much you make.

Your employer is required to withhold this tax and send it to the IRS along with their matching portion. If you work for multiple employers in the same year, each one withholds 1.45% independently. You won't overpay because the tax has no wage ceiling, but you should check your pay stub to confirm the amount is correct.

The additional 0.9% tax on high earners

If your wages exceed $200,000 in a year (or $250,000 if you're married filing jointly, or $125,000 if married filing separately), you owe an extra 0.9% Medicare tax on the amount above that threshold. This tax was added in 2013 as part of the Affordable Care Act and applies to both employees and self-employed workers.

For employees, your employer withholds this extra 0.9% once your year-to-date wages cross the threshold. If you work for multiple employers, each one withholds based only on what they pay you, so you might overpay. When you file your tax return, you can claim a credit for the overpayment. Self-employed workers calculate this tax themselves when they file their return.

This additional tax has no employer match — only the employee or self-employed person pays it. It applies to wages, salaries, and tips, but not to investment income, pensions, or Social Security benefits.

What self-employed workers pay

If you're self-employed, you pay both the employee and employer portions of Medicare tax yourself. That's 2.9% total on your net self-employment income (your profit after business expenses). On top of that, you also owe the additional 0.9% if your income exceeds the thresholds mentioned above.

The good news: you can deduct half of your self-employment tax on your income tax return. So while you pay 2.9%, you only report 1.45% as an expense. This reduces your taxable income and slightly lowers your overall tax bill. You calculate self-employment tax on Schedule SE when you file your return.

Self-employed workers should set aside money for Medicare tax throughout the year, either by making quarterly estimated tax payments or by saving a portion of their income. Unlike employees, where the employer withholds automatically, you're responsible for paying it yourself.

When you stop paying Medicare tax

Once you start receiving Social Security benefits, you stop paying Medicare payroll taxes on those benefits. The same applies if you're receiving a pension or other retirement income — Medicare tax only applies to earned income from work.

If you continue working after you start Social Security, you still pay Medicare tax on your wages from that job. The tax doesn't stop just because you're receiving benefits; it stops only on the benefit income itself.

If you're still working past age 65 and haven't yet claimed Social Security, you continue paying Medicare tax on your wages. There's no age at which the tax automatically stops — it stops only when your income is no longer from employment.

Part B and Part D premiums are separate from payroll taxes

Medicare Part A (hospital insurance) is funded by the payroll taxes described above. But Part B (medical insurance) and Part D (prescription drug coverage) require monthly premiums that come out of your Social Security check or are billed to you directly.

Part B premiums vary by income. For 2024, the standard premium is $174.70 per month, but if your income was above $97,000 (single) or $194,000 (married) in the prior two years, you pay a higher amount. Part D premiums also vary by plan and income level.

These premiums are not the same as payroll taxes. They're monthly charges for coverage, and they increase most years. You can see your current premium amount on your Social Security statement or Medicare bill.

How to verify your Medicare tax is being withheld correctly

Check your pay stub each month to confirm the 1.45% Medicare tax is being deducted. The line item should say "Medicare" or "HI" (Hospital Insurance). Compare it to your gross pay: 1.45% of your wages should match the amount shown.

At the end of the year, your employer sends you a W-2 form showing total wages and total Medicare tax withheld. Box 5 on the W-2 shows Medicare wages; Box 6 shows Medicare tax paid. Add up all your W-2s if you worked for multiple employers, and make sure the total Medicare tax matches 1.45% of your total Medicare wages (plus 0.9% of wages over the threshold if applicable).

If you're self-employed, keep records of your net income and calculate your own Medicare tax on Schedule SE. If you think you've overpaid, you can claim a credit when you file your return. If you underpaid, you'll owe the difference plus interest.

Frequently Asked Questions

Does Medicare tax explore to my 401(k) or other retirement contributions?

No. Medicare tax is withheld before your 401(k) contribution is deducted. So if you earn $1,000 and contribute $100 to your 401(k), Medicare tax is calculated on the full $1,000, not $900. This is different from Social Security tax, which also applies to the full amount before retirement contributions.

What happens if I work in multiple states?

Medicare tax is federal, so it's the same no matter which state you work in. Each employer withholds 1.45% based on what they pay you. If you cross the $200,000 threshold across multiple jobs, you might overpay the additional 0.9% tax, but you'll get a credit when you file your federal return.

Do I pay Medicare tax on tips?

Yes. Tips are considered wages for Medicare tax purposes. Your employer should include tips in your gross pay when calculating the 1.45% withholding. If you receive cash tips that your employer doesn't know about, you're still required to report them and pay Medicare tax on them.

Can I opt out of Medicare tax?

No. Medicare tax is mandatory for all workers. There's no religious exemption or other way to avoid it, unlike Social Security tax, which has limited exemptions for certain religious groups. If you're working, the tax is withheld automatically.

Does my spouse's income count toward the additional 0.9% tax threshold?

Only if you're married filing jointly. The threshold is $250,000 for joint filers, meaning your combined income from both spouses. If you're married filing separately, the threshold drops to $125,000 per person. If you're single, it's $200,000.