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

When you see your paycheck, Medicare tax comes out as a fixed percentage: 1.45% from your wages and 1.45% from your employer's contribution, totaling 2.9%. If you are self-employed, you pay the full 2.9% yourself. This rate has stayed the same since 1985 and applies to all your wages with no upper limit — unlike Social Security tax, which stops after you earn a certain amount each year.

The money goes into the Medicare Hospital Insurance Trust Fund, which pays for Part A benefits: hospital stays, skilled nursing care, hospice, and home health services. You do not choose whether to pay it. If you work, it comes out automatically.

Key Takeaways

  • Medicare tax is 1.45% of your wages if you are an employee, with your employer paying another 1.45%.
  • Self-employed people pay the full 2.9% Medicare tax on their net earnings from self-employment.
  • There is no wage cap on Medicare tax — it applies to every dollar you earn, unlike Social Security tax.
  • High earners pay an additional 0.9% Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).
  • Medicare tax funds Part A hospital insurance and is separate from the premiums you pay for Part B and Part D.

The additional 0.9% Medicare tax for higher earners

If your income exceeds certain thresholds, you pay an extra 0.9% Medicare tax on the amount over that threshold. For single filers, the threshold is $200,000 per year. For married couples filing jointly, it is $250,000. For married people filing separately, it is $125,000. This extra tax started in 2013 and funds the Affordable Care Act.

Your employer withholds this additional tax if your wages alone cross the threshold. If you have income from multiple jobs or are self-employed, you may owe it at tax time even if no single employer withheld it. The IRS Form 8959 is where you calculate what you owe when you file your return.

How self-employed people calculate Medicare tax

If you are self-employed, you pay both the employee and employer share of Medicare tax. You calculate it on your net self-employment income — your business income minus business expenses — using Schedule SE when you file taxes. The rate is still 2.9%, but you get to deduct half of what you pay as a business expense on your tax return, which lowers your taxable income slightly.

Self-employed people also pay the additional 0.9% Medicare tax if their net self-employment income plus any wages from other jobs exceeds the threshold for their filing status. You report this on Form 8959 along with any wages subject to the extra tax.

Medicare tax versus Medicare premiums

Medicare tax and Medicare premiums are two different things. The 2.9% tax you pay while working funds Part A (hospital insurance) and goes into a trust fund. Premiums are what you pay monthly after you turn 65 and enroll in Medicare — they cover Part B (doctor visits), Part D (prescription drugs), and supplemental plans. You can have paid Medicare tax your whole life and still owe premiums once you are on Medicare.

Your Medicare tax payments do give you credit toward Part A may be able to access. If you or your spouse paid Medicare tax for at least 10 years (40 quarters), you do not pay a Part A premium. If you have not worked that long, you can still enroll in Part A but will pay a monthly premium for it.

Why Medicare tax has no wage cap

Social Security tax stops once you earn $168,600 in a year (the amount changes yearly). Medicare tax does not have this cap — it applies to every dollar you earn, no matter how much. This means high earners pay Medicare tax on income that would not be subject to Social Security tax at all.

The reason is that Medicare Part A is designed to cover hospital costs for everyone over 65, and those costs do not stop at a certain income level. Congress set it up so that higher earners contribute proportionally more to the fund that will eventually cover their own hospital care.

Where your Medicare tax money goes

Every dollar of Medicare tax goes into the Hospital Insurance Trust Fund, which pays for Part A services: inpatient hospital care, skilled nursing facility stays after a hospital stay, home health services, and hospice care. The fund also covers blood transfusions and certain preventive services.

The trust fund is separate from the general federal budget. It is managed by the Centers for Medicare & Medicaid Services (CMS) and has its own trustees who report yearly on whether the fund has enough money to pay all Part A claims. In recent years, the trustees have warned that the fund will be depleted within a certain timeframe if no changes are made, which is why Medicare financing is a topic in policy discussions.

Checking your Medicare tax record

Your Medicare tax payments are tracked by Social Security, and you can see them on your Social Security Statement. You can create a my Social Security account at ssa.gov to view your earnings record and the Medicare tax you have paid each year. This record is important because it determines whether you may have access to for Part A without a premium when you turn 65.

If you notice errors in your earnings record — a year where you know you worked but it does not show up, or an amount that looks wrong — contact Social Security to correct it. You have a limited time to fix errors, so it is worth checking before you turn 65 and enroll in Medicare.

Frequently Asked Questions

Do I pay Medicare tax on my entire paycheck?

Yes, Medicare tax applies to all your wages with no upper limit. Unlike Social Security tax, which stops after you reach an annual earnings threshold, Medicare tax is withheld from every dollar you earn as an employee or self-employed person.

What happens to Medicare tax if I work past age 65?

You continue to pay Medicare tax on your wages even after you turn 65 and enroll in Medicare. The tax does not stop; it keeps funding the Hospital Insurance Trust Fund for current and future beneficiaries.

Can I opt out of paying Medicare tax?

No. Medicare tax is mandatory for all workers. There is no option to skip it or redirect it to a private account. It is withheld automatically from paychecks and is part of the Social Security and Medicare system.

If I paid Medicare tax for 40 years, do I get Part A for free?

If you or your spouse paid Medicare tax for at least 10 years (40 quarters), you may have access to for Part A hospital insurance without paying a monthly premium when you turn 65. The 10-year requirement is much shorter than 40 years of payments.

How is the additional 0.9% Medicare tax different from the regular 2.9%?

The regular 2.9% Medicare tax applies to all wages. The additional 0.9% applies only to wages above $200,000 (single) or $250,000 (married filing jointly) and was added in 2013 to help fund the Affordable Care Act. High earners pay both.