Medicare tax rates for employees and self-employed workers

If you work and earn a paycheck, you pay 1.45% of your gross wages toward Medicare Part A (hospital insurance). Your employer matches that amount, so 2.9% leaves your paycheck total. This rate is the same whether you earn $30,000 or $300,000 a year — there is no income cap on Medicare tax, unlike Social Security tax.

If you are self-employed, you pay both sides: 2.9% of your net self-employment income goes to Medicare. You can deduct half of that amount when you file taxes, but you still owe the full 2.9% to the IRS.

On top of the standard 1.45%, there is an additional Medicare tax of 0.9% that applies only to high earners. If you are single and earn more than $200,000 in a year, or married filing jointly and earn more than $250,000, you owe the extra 0.9% on income above those thresholds. Your employer withholds this automatically if your wages cross the limit.

Key Takeaways

  • Employees pay 1.45% of wages to Medicare, with employers matching the same amount.
  • Self-employed workers pay 2.9% of net self-employment income, though half is deductible at tax time.
  • An additional 0.9% Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly).
  • Medicare tax has no income cap, so high earners pay the same percentage as low earners on all wages.
  • These taxes fund Medicare Part A, which covers hospital stays, skilled nursing, hospice, and some home health care.

Where Medicare tax money goes

The 1.45% you pay funds Medicare Part A, the hospital insurance portion of Medicare. This covers inpatient hospital stays, skilled nursing facility care after a hospital stay, hospice services, and some home health services. Part A is the only part of Medicare that is funded primarily through payroll tax; Parts B, D, and supplemental coverage come from premiums and general tax revenue.

When you turn 65 and become may be able to access for Medicare, you do not pay a separate premium for Part A if you or your spouse paid Medicare taxes for at least 10 years (40 quarters). If you did not work long enough to may have access to, you can still buy Part A coverage, but the premium is higher.

How the additional 0.9% tax works

The extra 0.9% Medicare tax began in 2013 and applies only to high-income earners. The income 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 adjust for inflation, so more people cross them each year as wages rise.

Your employer withholds the 0.9% automatically once your year-to-date wages exceed the threshold. If you have multiple jobs or your spouse also works, you may owe more than your employer withheld. You settle the difference when you file your tax return. Self-employed workers calculate and pay the additional tax themselves on Schedule SE.

Medicare tax for self-employed people

Self-employed workers report income on Schedule C (or Schedule F for farmers) and calculate self-employment tax on Schedule SE. The self-employment tax rate is 15.3% total: 12.4% for Social Security (on income up to $168,600 in 2024, though this cap changes yearly) and 2.9% for Medicare.

When you file your return, you can deduct half of your self-employment tax as an adjustment to income. This deduction lowers your taxable income but does not reduce the amount you owe to Medicare. If your net self-employment income exceeds $200,000 (single) or $250,000 (married filing jointly), you also owe the additional 0.9% Medicare tax on the excess.

What happens if you work past 65

If you continue working after you turn 65, you keep paying Medicare tax on your wages even though you are already covered by Medicare. You cannot opt out. The tax still funds the Medicare trust fund, which supports all beneficiaries, not just you.

Working past 65 does not change your Medicare coverage or your Part A premium (if you may have access to for premium-free Part A). It also does not affect your Social Security benefit if you have not yet claimed it — continuing to work can actually increase your future benefit amount.

Medicare tax withholding on your paycheck

Your employer withholds Medicare tax automatically from each paycheck. You can see the amount on your pay stub labeled as "Medicare" or "Med Tax." The standard 1.45% appears on every paycheck. The additional 0.9% appears only once your year-to-date wages cross the income threshold for your filing status.

If you think your employer withheld the wrong amount, you can adjust your W-4 form, though Medicare tax withholding is not optional — you cannot claim exemptions to reduce it. If you have questions about what was withheld, your payroll department or a tax professional can review your pay stubs and year-end W-2 form.

Frequently Asked Questions

Do I pay Medicare tax on tips?

Yes. Tips are treated as wages for Medicare tax purposes. Your employer should include reported tips in your gross income when calculating Medicare tax withholding. If you receive cash tips you did not report to your employer, you still owe Medicare tax on them when you file your return.

What if I work in a state with no income tax?

Medicare tax is federal and applies everywhere, regardless of state income tax. You pay the same 1.45% (or 2.9% if self-employed) whether you live in a state with income tax or not. State tax status does not change your Medicare tax obligation.

Can I deduct Medicare tax on my return?

If you are an employee, no — Medicare tax is withheld and you cannot deduct it. If you are self-employed, you can deduct half of your self-employment tax (which includes Medicare tax) as an adjustment to income on your return. This lowers your taxable income but does not reduce the amount you owe.

Do I pay Medicare tax on investment income?

No. The 1.45% Medicare tax applies only to wages and self-employment income. However, the additional 0.9% Medicare tax can explore to certain investment income — including capital gains, dividends, and interest — if your total modified adjusted gross income exceeds the threshold for your filing status.

What if I did not pay Medicare tax for 10 years?

You can still get Medicare Part A at 65, but you will pay a monthly premium. The premium amount depends on how many quarters you paid Medicare tax. If you paid for 30 to 39 quarters, the premium is lower than if you paid for fewer than 30 quarters. You can work longer to increase your quarters and lower your premium.