What the Medicare tax is and why it comes out of your pay

The Medicare tax is a payroll deduction that funds the Medicare program. It comes out of your paycheck automatically, and your employer matches what you pay. The current rate is 2.9% of your wages — you pay 1.45% and your employer pays 1.45%. If you are self-employed, you pay both halves, which totals 2.9%.

This tax has been part of the U.S. tax system since 1966. It is separate from Social Security tax, which is deducted on a different line of your pay stub. Medicare tax has no wage cap, meaning you pay it on every dollar you earn, no matter how much you make in a year.

The money collected goes into the Hospital Insurance Trust Fund, which pays for Medicare Part A — hospital stays, skilled nursing care, and hospice. It does not pay for doctor visits (Part B) or prescription drugs (Part D), which are funded differently.

Key Takeaways

  • You pay 1.45% of your wages in Medicare tax, and your employer pays another 1.45%, for a total of 2.9%.
  • Self-employed people pay the full 2.9% themselves, though they can deduct half of it on their tax return.
  • An additional 0.9% Medicare tax applies to wages above a certain threshold, and you pay this yourself with no employer match.
  • Medicare tax is withheld from every paycheck and continues even after you turn 65 and enroll in Medicare.
  • The money you pay in Medicare tax does not create a personal account; it funds current Medicare beneficiaries' care.

The additional Medicare tax on high earners

If your income exceeds a certain threshold, you pay an extra 0.9% Medicare tax on the amount above that limit. This additional tax was added in 2013 as part of the Affordable Care Act. Your employer withholds it automatically if your wages cross the threshold.

The income thresholds depend on your filing status and are adjusted each year. 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 earn above these amounts, you owe the extra 0.9% on the overage only.

Unlike the standard 1.45% Medicare tax, your employer does not match the additional 0.9%. You pay it entirely yourself. If you have multiple jobs, each employer withholds based on what they pay you, which can sometimes result in overwithholding — you may then claim a credit when you file your tax return.

How Medicare tax appears on your pay stub

Look for a line labeled "Medicare Tax," "Med Tax," or "FICA Medicare." The amount shown is what your employer withheld from that paycheck. On the same stub, you should see a matching employer contribution, though that money does not reduce your take-home pay — it is a separate cost to your employer.

Your year-to-date Medicare tax appears on your pay stub as well, so you can track how much you have paid over the year. When you receive your W-2 form in January, box 6 shows your total Medicare tax withheld for the year. This figure is important for your tax return and for understanding how much you contributed to Medicare.

If you also owe the additional 0.9% Medicare tax, it appears on a separate line. Some pay stubs label it "Additional Medicare Tax" or "Excess Medicare Tax." This line only shows a withholding if your year-to-date wages have crossed the threshold for your filing status.

What happens to the Medicare tax you pay

The Medicare tax you pay does not go into a personal account with your name on it. Instead, it goes into the Hospital Insurance Trust Fund, which is a shared pool. The money collected from all workers and employers pays for the hospital care of people currently on Medicare — people over 65, some younger people with disabilities, and people with end-stage renal disease.

When you turn 65 and enroll in Medicare Part A, you become may be able to access for hospital coverage without paying a separate premium. Your Part A coverage is funded by the Medicare taxes that current workers are paying now. This is a pay-as-you-go system, not a savings account.

The Hospital Insurance Trust Fund has faced financial pressure in recent years because more people are retiring and living longer. The trustees of the fund publish annual reports on its solvency. Despite these concerns, Medicare Part A continues to operate, and the tax rate has remained stable since 1985.

Medicare tax if you are self-employed

If you work for yourself, you pay both the employee and employer portions of Medicare tax — the full 2.9%, plus the additional 0.9% if your net self-employment income exceeds the threshold. You calculate this tax on Schedule SE (Self-Employment Tax) when you file your annual tax return.

The good news is that you can deduct half of your self-employment tax on your tax return. This deduction reduces your taxable income, which lowers your overall tax bill. You also pay self-employment tax only on 92.35% of your net self-employment income, not on the full amount, which provides a small additional reduction.

Self-employed people often pay their Medicare tax (and income tax) through quarterly estimated tax payments rather than through payroll withholding. If you are self-employed, your accountant or tax software can help you calculate the correct amount to pay each quarter.

Medicare tax and your benefits after age 65

You continue to pay Medicare tax on your wages even after you turn 65 and enroll in Medicare. If you keep working past 65, your employer still withholds 1.45% for Medicare tax, and you still pay the additional 0.9% if your income is high enough. This is true whether you work full-time or part-time.

The Medicare tax you pay after 65 does not increase your Part A benefits — those are determined by your age and enrollment status, not by continued contributions. However, if you delay claiming Social Security past your full retirement age, your Social Security benefit will be higher when you do claim it, and the Medicare tax you pay is part of the overall Social Security and Medicare system.

If you are still working and have employer health insurance, you may not need to use Medicare Part A right away. You can delay Part A enrollment without penalty if you have creditable coverage through your job, though you must enroll within eight months of losing that coverage to avoid late-enrollment penalties.

Questions to ask your employer or tax professional

If you notice an error on your pay stub — for example, if Medicare tax was not withheld when it should have been, or if the amount seems wrong — contact your employer's payroll department. They can review your W-4 form and your earnings record to make sure the correct amount is being withheld.

If you have multiple jobs and are concerned about overwithholding of the additional 0.9% Medicare tax, ask your tax professional whether you should adjust your W-4 forms. You may be able to reduce withholding at one job if another job is already withholding enough to cover your total liability.

If you are self-employed and unsure how to calculate your Medicare tax, a tax professional or accountant can walk you through Schedule SE and help you set aside the right amount for quarterly payments. This is especially important in your first year of self-employment, when the calculation is new.

Frequently Asked Questions

Why do I still pay Medicare tax after I turn 65?

Medicare tax funds current beneficiaries' care, not a personal account. You pay it on all wages throughout your working life, including after 65 if you continue to work. The tax rate has been stable since 1985 and is not tied to your age or enrollment in Medicare.

Can I get a refund of Medicare tax I paid in previous years?

No. Medicare tax is not refundable. It goes into the Hospital Insurance Trust Fund to pay for current Medicare beneficiaries' care. You cannot recover it as a refund, though you may be able to claim a credit if you overpaid due to multiple jobs.

What if I disagree with the Medicare tax amount on my pay stub?

Check your W-4 form and your year-to-date earnings on your pay stub. The calculation should be straightforward: 1.45% of your gross wages, plus 0.9% on wages above the threshold if applicable. If the math does not match, contact your payroll department to review your withholding.

Does Medicare tax go up every year?

The standard Medicare tax rate has been 2.9% (1.45% employee, 1.45% employer) since 1985. The additional 0.9% tax was added in 2013. The income thresholds for the additional tax are adjusted annually for inflation, but the tax rates themselves have remained stable.

If I am not a U.S. citizen, do I still pay Medicare tax?

If you are working in the United States and earning wages, you pay Medicare tax regardless of citizenship status. Your employer withholds it from your paycheck the same way. Visa status and work authorization determine whether you can work legally, not whether you pay payroll taxes.