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

Medicare tax comes out of your paycheck automatically. The rate is 2.9 percent of your gross wages — the amount before deductions. Your employer pays half (1.45 percent) and you pay the other half (1.45 percent). If you are self-employed, you pay both halves yourself, which comes to 2.9 percent of your net earnings from self-employment.

There is also an additional Medicare tax of 0.9 percent that applies only to wages above a certain threshold. This threshold is $200,000 for single filers and $250,000 for married couples filing jointly. Once your wages cross that line in a calendar year, you pay the extra 0.9 percent on everything above it. Your employer does not match this additional tax — you pay it alone.

Medicare tax funds two programs: Hospital Insurance (Part A), which covers inpatient hospital care, and the Hospital Insurance Trust Fund. The money does not go into a personal account with your name on it. It goes into a shared pool that pays benefits for people currently on Medicare, regardless of how much they paid in.

Key Takeaways

  • The standard Medicare tax rate is 2.9 percent of wages, split evenly between employee and employer at 1.45 percent each.
  • Self-employed workers pay the full 2.9 percent themselves on net self-employment income.
  • An additional 0.9 percent Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly), and you pay this alone.
  • Medicare tax is withheld automatically from paychecks and reported on your W-2 or tax return.

How Medicare tax appears on your paycheck

Your employer withholds Medicare tax from each paycheck before you receive it. On a pay stub, it usually appears as a line item labeled "Medicare" or "Med Tax" next to the amount withheld. The withholding is automatic — you do not have to request it or fill out a form.

At the end of the year, your employer reports the total Medicare tax withheld on your W-2 form in Box 6. When you file your federal income tax return, the IRS uses this information to verify that the correct amount was taken out. If you were withheld too much or too little, the difference is settled when you file.

If you have multiple jobs, each employer withholds Medicare tax separately. The standard 1.45 percent applies to all wages from all employers. However, the additional 0.9 percent is calculated across all jobs combined. If you overpay the additional tax because your employers did not know about your other income, you can claim a credit when you file your return.

Self-employment and Medicare tax

If you are self-employed — a freelancer, contractor, or business owner — you pay Medicare tax as part of self-employment tax. Self-employment tax includes both Social Security tax and Medicare tax. You calculate it on your net earnings (income minus business expenses) using Schedule SE.

The Medicare portion of self-employment tax is 2.9 percent. Because you have no employer to split the cost, you pay the full amount yourself. You also pay the additional 0.9 percent Medicare tax if your net self-employment income, combined with any wages from other sources, exceeds the threshold for your filing status.

Self-employed workers can deduct half of their self-employment tax as an adjustment to income on their tax return. This deduction reduces your taxable income but does not reduce the amount of Medicare tax you owe. You report self-employment tax on Form 1040 when you file.

The additional 0.9 percent Medicare tax and income thresholds

The additional Medicare tax was introduced in 2013 as part of the Affordable Care Act. It applies only to high earners and is calculated separately from the standard 2.9 percent rate. The income thresholds are $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately.

This tax applies to wages, self-employment income, and certain investment income such as interest, dividends, and capital gains. If you have both wages and self-employment income, they are combined to determine whether you cross the threshold. Once you do, the 0.9 percent applies to all income above the limit.

Employers are required to withhold the additional 0.9 percent Medicare tax on wages above $200,000, regardless of your filing status or other income. This can lead to overwithholding if you are married filing jointly or if you have income from multiple sources. You correct this when you file your return by claiming a credit for the overpaid amount.

Medicare tax versus income tax

Medicare tax and income tax are separate. Medicare tax is a flat 2.9 percent (plus 0.9 percent additional for high earners) and funds only Medicare. Income tax is progressive — the rate increases as your income rises — and funds general government operations. Both are withheld from your paycheck, but they go to different places and fund different programs.

On your pay stub, Medicare tax and income tax appear as separate line items. Your employer withholds income tax based on the W-4 form you complete, which lets you control how much is taken out. Medicare tax withholding is automatic and does not change based on your W-4 — it is always 1.45 percent (or 2.45 percent if you earn above the threshold).

When you file your tax return, Medicare tax and income tax are reported separately. Medicare tax does not reduce your taxable income for federal income tax purposes, so you pay income tax on the full amount of your wages even though Medicare tax was already withheld.

What happens if you do not pay Medicare tax

If you are an employee, you cannot avoid Medicare tax — your employer is required by law to withhold it. If an employer fails to withhold or pay Medicare tax, the IRS can pursue the employer for the unpaid amount plus penalties and interest. You are not personally liable for an employer's failure to withhold, but you should verify that Medicare tax appears on your pay stub.

If you are self-employed and do not report self-employment income or underreport it, the IRS can assess back taxes, penalties, and interest. Self-employment tax is calculated based on your net earnings, so keeping accurate records of income and expenses is important. If you owe self-employment tax and do not pay it, the debt does not go away — the IRS can pursue collection for years.

Frequently Asked Questions

Is Medicare tax the same as Social Security tax?

No. Medicare tax is 2.9 percent and funds Medicare. Social Security tax is 6.2 percent and funds Social Security retirement, disability, and survivor benefits. Both are withheld from your paycheck separately. Together, they make up FICA (Federal Insurance Contributions Act) taxes.

Do I pay Medicare tax on all my income?

Yes, the standard 2.9 percent Medicare tax applies to all wages and self-employment income with no cap. The additional 0.9 percent applies only to income above the threshold for your filing status. Unlike Social Security tax, which stops once you reach the annual wage base limit, Medicare tax continues on every dollar you earn.

Can I get a refund of Medicare tax if I overpaid?

If you overpaid the additional 0.9 percent Medicare tax — usually because you had multiple jobs and each employer withheld it separately — you can claim a credit on your tax return. You cannot get a refund of the standard 2.9 percent Medicare tax because that is a required contribution to the program.

What if I am retired and still working part-time?

You still pay Medicare tax on your wages from part-time work. Being on Medicare does not exempt you from paying Medicare tax. The tax continues as long as you have earned income from wages or self-employment, regardless of your age or Medicare status.

How is Medicare tax different for W-2 employees versus 1099 contractors?

W-2 employees have Medicare tax withheld by their employer at 1.45 percent. The employer also pays 1.45 percent. Contractors and self-employed workers (1099) pay the full 2.9 percent themselves as part of self-employment tax. Both pay the same total rate, but the timing and responsibility differ.