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

Medicare tax is a payroll tax that funds the Medicare program. If you work as an employee, you pay 1.45 percent of your gross wages, and your employer pays the matching 1.45 percent. If you are self-employed, you pay the full 2.9 percent yourself, though you can deduct half of it on your tax return.

Unlike Social Security tax, which stops once you reach a certain income threshold, Medicare tax applies to all your wages with no upper limit. This means high earners pay Medicare tax on every dollar they make, with no cap.

There is also an additional Medicare tax of 0.9 percent that applies to wages above a certain amount. For 2024, this threshold is $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. Only the employee pays this additional tax — employers do not match it.

Key Takeaways

  • The standard Medicare tax rate is 2.9 percent of wages, with employees and employers each paying 1.45 percent.
  • Self-employed workers pay the full 2.9 percent but can deduct half of it as a business expense.
  • An additional 0.9 percent Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly).
  • Medicare tax has no income cap, so it applies to all wages no matter how much you earn.

How the standard 2.9 percent breaks down between employee and employer

When you see your paycheck, the Medicare tax line shows 1.45 percent deducted from your gross pay. Your employer withholds this amount and sends it to the IRS along with their own matching 1.45 percent contribution. The total that funds Medicare is 2.9 percent, but you only see half of it on your stub.

This is different from how you might think about taxes. Your employer's share is a real cost to them — it is money they spend on your behalf — but it does not appear on your paycheck. Both halves go into the same Medicare trust fund.

If you change jobs mid-year, each employer withholds 1.45 percent from the wages they pay you. There is no coordination between employers, so if you worked for two companies in the same year, you will have paid 1.45 percent to each one. You cannot get a refund for this unless you overpaid the additional Medicare tax.

The additional 0.9 percent Medicare tax for high earners

In 2013, a new tax took effect: an additional 0.9 percent Medicare tax on wages above a threshold. For 2024, that threshold is $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.

Unlike the standard 2.9 percent Medicare tax, this additional tax is paid only by the employee. Your employer does not match it. If you earn $220,000 as a single filer in 2024, you pay an additional 0.9 percent on the $20,000 above the $200,000 threshold — that is $180 extra.

Your employer is required to withhold this tax once your wages cross the threshold. If you have multiple jobs and your combined wages exceed the threshold, you may overpay. You can claim a refund on your tax return if you did.

Medicare tax for self-employed workers

If you are self-employed, you pay both the employee and employer portions of Medicare tax — the full 2.9 percent — on your net self-employment income. This is calculated on Schedule SE of your tax return.

The good news is that you can deduct half of your self-employment tax as an adjustment to income. This reduces your taxable income and lowers your overall tax bill. On a $100,000 net income, you would pay 2.9 percent in Medicare tax ($2,900), but you can deduct half of that ($1,450) from your income before calculating income tax.

The additional 0.9 percent Medicare tax also applies to self-employed income above the same thresholds. You report this on Form 8959 when you file your return.

Why Medicare tax has no income cap

Social Security tax stops once you reach a certain wage base — in 2024, that is $168,600. After you earn that much, no more Social Security tax is withheld. Medicare tax, by contrast, has no limit. You pay 1.45 percent on your first dollar and your millionth dollar.

Congress set it up this way because Medicare is meant to cover everyone over 65, regardless of income. Social Security is an earned-benefit program where higher earners get higher benefits, so there is a cap. Medicare is more of a universal program, so the tax applies to all wages.

This is why the additional 0.9 percent tax was added in 2013 — to bring in more revenue for Medicare as the program's costs grew. The standard 2.9 percent was not enough to sustain it long-term.

How Medicare tax appears on your pay stub and tax return

On your W-2 form, Medicare tax withheld appears in box 6. Your employer reports the wages subject to Medicare tax in box 5. When you file your return, the IRS cross-checks these numbers against what you report.

If you overpaid the additional 0.9 percent Medicare tax — because you had multiple jobs or your employer did not coordinate withholding across jobs — you claim the refund on Form 8959 when you file. This is one of the few situations where you can get Medicare tax money back.

Self-employed workers report Medicare tax on Schedule SE and carry the amount to Form 1040. The deductible portion goes on line 27 of Form 1040 as an adjustment to income.

Frequently Asked Questions

Does Medicare tax explore to all types of income?

Medicare tax applies to wages and self-employment income. It does not explore to investment income, interest, dividends, or capital gains. If you have a job and also earn money from investments, only the wages are subject to Medicare tax.

Can I avoid paying Medicare tax?

No. If you are an employee, your employer is required to withhold it. If you are self-employed, you must pay it when you file your return. There are no exemptions or ways to opt out, though certain religious groups may be exempt under specific IRS rules.

What happens if I overpay the additional 0.9 percent Medicare tax?

If you worked multiple jobs and your combined wages exceeded the threshold, you may have overpaid. File Form 8959 with your tax return to claim a refund of the excess. The IRS will process it with your return or send you a refund check.

Does the Medicare tax threshold increase each year?

No. The $200,000 (single) and $250,000 (married filing jointly) thresholds for the additional 0.9 percent Medicare tax have remained the same since 2013 and do not adjust for inflation. This means more workers cross the threshold each year as wages rise.