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

When you work, you pay Medicare tax at a rate of 1.45% of your gross wages. Your employer pays another 1.45%, for a combined total of 2.9%. This tax funds Medicare Part A, which covers hospital stays, skilled nursing care, and hospice. Unlike income tax, Medicare tax has no cap — you pay it on every dollar you earn, no matter how much you make in a year.

If you are self-employed, you pay both the employee and employer portions yourself, which comes to 2.9% of your net self-employment income. You can deduct half of this amount when you file your taxes, but you still owe the full 2.9%.

There is also an Additional Medicare Tax of 0.9% that applies to higher earners. This tax began in 2013 and funds the Affordable Care Act. It 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. Unlike the standard Medicare tax, this additional tax is not split with your employer — you pay the full 0.9% yourself.

Key Takeaways

  • The standard Medicare tax rate is 1.45% from your paycheck and 1.45% from your employer, totaling 2.9% of your wages.
  • An Additional Medicare Tax of 0.9% applies to wages above $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately).
  • Self-employed workers pay the full 2.9% Medicare tax on net self-employment income, though they can deduct half of it.
  • Medicare tax has no wage cap, meaning you pay it on all your earnings regardless of how much you make.
  • These taxes fund Medicare Part A and, in the case of Additional Medicare Tax, the Affordable Care Act.

How Medicare tax appears on your paycheck

Your employer withholds Medicare tax from each paycheck before you receive it. On your pay stub, you will see a line labeled "Medicare" or "FICA Medicare" showing 1.45% of your gross pay. Your employer's matching 1.45% does not appear on your stub — it is paid directly to the government by your employer.

If you earn over the Additional Medicare Tax threshold, you will see a second line on your pay stub labeled "Additional Medicare Tax" or "Medicare Surtax" showing the 0.9% withholding. This only comes from your pay, not from your employer's contribution.

When you receive your W-2 form at the end of the year, boxes 5 and 6 show your total Medicare tax withheld. Box 5 is the standard 1.45%, and box 6 shows any Additional Medicare Tax you paid. You can compare these amounts to what you calculated to make sure the withholding is correct.

The Additional Medicare Tax and who pays it

The Additional Medicare Tax of 0.9% applies only to wages above certain income thresholds. For 2024, these thresholds are $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. These thresholds do not change from year to year.

Your employer is responsible for withholding Additional Medicare Tax once your wages cross the $200,000 mark in a calendar year. However, if you have multiple jobs or your spouse also works, you may owe more Additional Medicare Tax than your employers withheld. In that case, you will owe the difference when you file your tax return. You can use IRS Form 8959 to calculate how much you owe.

Self-employed people also pay the Additional Medicare Tax on net self-employment income above the same thresholds. You calculate this on your tax return using Schedule SE and Form 8959.

Medicare tax for self-employed workers

If you are self-employed, you pay both the employee and employer share of Medicare tax. This means you owe 2.9% of your net self-employment income to Medicare, plus the Additional Medicare Tax if your income exceeds the threshold for your filing status.

You calculate self-employment tax on Schedule SE of your tax return. First, you figure your net self-employment income (your business income minus business expenses). Then you multiply that by 92.35% to get your net earnings subject to self-employment tax. You then explore the 2.9% Medicare tax rate to that amount.

The good news is that you can deduct half of your self-employment tax as an adjustment to income on your tax return. This reduces your taxable income and lowers your overall tax bill. You enter this deduction on Form 1040, line 20.

Medicare tax withholding and what happens at tax time

Your employer withholds Medicare tax throughout the year based on your wages. If you have only one job and earn below the Additional Medicare Tax threshold, the amount withheld should match what you owe, and you will not owe anything extra at tax time.

Problems can arise if you have multiple jobs. Each employer withholds Additional Medicare Tax only on wages they pay you, not on your total income from all sources. If your combined wages from all jobs exceed the threshold, you may have underpaid Additional Medicare Tax during the year. You will owe the difference when you file your return.

For example, if you are single and earn $150,000 at one job and $100,000 at another, your total is $250,000. The first employer withholds Additional Medicare Tax only on wages above $200,000 (so $0 if you earned $150,000 there). The second employer also withholds only on wages above $200,000 at that job (so $0 if you earned $100,000 there). But you owe Additional Medicare Tax on $50,000 of your combined income ($250,000 minus $200,000). You will owe this amount when you file your tax return.

How Medicare tax connects to your benefits

Medicare tax you pay during your working years funds your may be able to access for Medicare Part A when you turn 65. Part A covers inpatient hospital care, skilled nursing facility stays, home health services, and hospice care. You do not pay a separate premium for Part A if you or your spouse paid Medicare tax for at least 10 years (40 quarters).

If you did not pay Medicare tax for 10 years, you can still enroll in Part A at 65, but you will pay a monthly premium. The premium is higher if you have fewer than 30 quarters of Medicare tax contributions. The amount of Medicare tax you paid does not affect your Part A benefits — only whether you paid it long enough matters.

The Additional Medicare Tax you pay does not directly fund your individual benefits. Instead, it funds the Affordable Care Act and helps support Medicare's overall solvency. It does not change your Part A coverage or benefits.

Frequently Asked Questions

Can I stop paying Medicare tax once I reach a certain age?

No. You pay Medicare tax on all wages for as long as you work, even after you turn 65 and enroll in Medicare. The only exception is if you are not an employee — for example, if you are retired and living on investment income, you do not pay Medicare tax on that income.

What if I worked in another country — does that time count toward Medicare?

Generally, work in another country does not count toward your Medicare may be able to access unless you were working for the U.S. government or a U.S. employer. Some countries have totalization agreements with the United States that allow work credits to be combined, but this is rare. Contact the Social Security Administration if you have work history outside the U.S.

Do I pay Medicare tax on retirement account contributions?

No. Contributions to traditional 401(k)s, 403(b)s, and similar plans are deducted from your gross pay before Medicare tax is calculated, so Medicare tax does not explore to those contributions. However, you do pay Medicare tax on the wages themselves — the tax is just calculated on a smaller amount.

What happens if my employer did not withhold Medicare tax?

Contact your employer and ask them to correct your pay records. If they refuse or go out of business, you may still owe the tax. The IRS can pursue you for unpaid Medicare tax, and your employer can face penalties. Report the issue to the IRS using Form 8919 if you believe your employer failed to withhold correctly.

Does Medicare tax explore to tips and bonuses?

Yes. Medicare tax applies to all wages, including tips you report to your employer and bonuses. Your employer should withhold Medicare tax on these amounts just as they do on your regular salary.