The Medicare tax rate is 2.9% of your wages, split evenly between you and your employer

When you see a deduction labeled "Medicare" on your pay stub, it represents 1.45% of your gross wages. Your employer contributes another 1.45%, for a combined total of 2.9%. This is a flat percentage that applies to all your wages with no income cap — unlike Social Security tax, which stops once you reach a certain annual earnings threshold.

If you are self-employed, you pay both portions yourself: 2.9% of your net self-employment income. You can deduct half of this amount when you file taxes, which offsets some of the cost.

There is also an additional Medicare tax of 0.9% that applies to higher earners. This kicks in at $200,000 of wages for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. Only you pay this extra portion — your employer does not contribute to it.

Key Takeaways

  • The standard Medicare tax is 2.9% of your wages: 1.45% withheld from your paycheck and 1.45% paid by your employer.
  • Medicare tax has no income limit, so you pay it on every dollar you earn, unlike Social Security tax.
  • If you earn over $200,000 (single) or $250,000 (married filing jointly), you owe an additional 0.9% Medicare tax on income above that threshold.
  • Self-employed workers pay the full 2.9% themselves but can deduct half of it as a business expense on their tax return.

Where your Medicare tax money goes

The Medicare tax you pay funds Part A of Medicare, which covers hospital stays, skilled nursing facility care, hospice, and home health services. Part A is the hospital insurance portion of Medicare and is available to most people age 65 and older, as well as some younger people with disabilities or end-stage renal disease.

Your contributions over your working years build up a record tied to your Social Security number. When you reach age 65 and enroll in Medicare, Part A coverage is based partly on how long you and your employer paid Medicare tax. Most people who have worked for at least 10 years (40 quarters) may have access to for Part A without paying a monthly premium.

How the additional Medicare tax works

The additional 0.9% Medicare tax was added in 2013 as part of the Affordable Care Act. It applies only to wages above the income thresholds mentioned above. If you are a single filer earning $220,000 per year, you would pay the extra 0.9% only on the $20,000 above the $200,000 threshold — not on your entire income.

Your employer is required to withhold this extra tax once your wages exceed the threshold for your filing status. If you have multiple jobs or if your spouse also works, you may end up overpaying this tax during the year. You can claim a refund of the overpayment when you file your tax return.

Self-employed workers and Medicare tax

If you run your own business or work as an independent contractor, you pay self-employment tax, which includes both the Social Security and Medicare portions. For Medicare specifically, you owe 2.9% of your net self-employment income, plus the additional 0.9% if your income exceeds the thresholds.

The advantage is that you can deduct half of your total self-employment tax (both Social Security and Medicare combined) when you calculate your adjusted gross income on your tax return. This reduces your taxable income and can lower the taxes you owe overall. You report self-employment tax on Schedule SE when you file.

Medicare tax and your paycheck

Your employer withholds Medicare tax automatically from each paycheck. You will see it listed separately on your pay stub, usually labeled as "Medicare" or "Med Tax." The amount is calculated on your gross wages before any other deductions like health insurance premiums or retirement contributions.

If you change jobs during the year, each employer withholds Medicare tax independently. There is no annual limit on how much Medicare tax you pay, so if you work for multiple employers or receive income from different sources, you may pay more in total Medicare tax than if you worked for one employer.

How Medicare tax differs from other payroll taxes

Social Security tax (6.2% from you, 6.2% from your employer) applies only to the first $168,600 of your annual wages in 2024 — this amount changes each year. Once you earn above that cap, you stop paying Social Security tax for the rest of the year. Medicare tax, by contrast, has no cap and continues on every dollar you earn.

This means that higher earners pay a larger share of their income toward Medicare than toward Social Security. A person earning $500,000 per year pays Medicare tax on all $500,000, but Social Security tax only on the first $168,600 (the 2024 cap).

Frequently Asked Questions

Why do I see Medicare tax withheld if I am not on Medicare yet?

Medicare tax is a payroll tax that funds the Medicare program for current beneficiaries. You pay it throughout your working years, and when you turn 65 or may have access to due to disability, your may be able to access for Part A is based on your payment history. It is not a savings account — your contributions support people currently using Medicare.

Can I opt out of paying Medicare tax?

No. Medicare tax is mandatory for all wage earners and self-employed workers in the United States. There are no exemptions based on age, health status, or religious belief, unlike some other taxes.

What happens if I overpay the additional Medicare tax?

If you have multiple jobs or your spouse works and your combined household income exceeds the threshold, you may overpay the additional 0.9% tax during the year. You can claim a refund of the overpayment when you file your federal tax return by reporting it on Form 8959.

Does Medicare tax go into a personal account with my name on it?

No. Medicare tax is pooled into the Hospital Insurance Trust Fund, which pays benefits for all Part A beneficiaries. Your individual payment history determines your may be able to access and whether you pay a premium, but the money itself is not held in a personal account.

How is self-employment Medicare tax different from employee Medicare tax?

Self-employed workers pay both the employee and employer portions (2.9% total), while employees split the cost with their employer. However, self-employed workers can deduct half of their self-employment tax, which reduces their taxable income and provides some tax relief.