The current Medicare tax rate is 2.9 percent of your wages

Medicare tax is split between you and your employer: you pay 1.45 percent, and your employer pays 1.45 percent. If you are self-employed, you pay both halves — 2.9 percent total — on your net earnings from self-employment. This rate has been the same since 1966 and applies to all wages with no income cap.

There is also an Additional Medicare Tax of 0.9 percent that applies only to wages above a threshold. For 2024, that threshold is $200,000 if you file as single, $250,000 if you file as married filing jointly, and $125,000 if you file as married filing separately. You pay this extra 0.9 percent on wages above your threshold; your employer does not contribute to it.

Your employer withholds Medicare tax from your paycheck automatically. If you are self-employed, you pay it when you file your tax return or make quarterly estimated tax payments.

Key Takeaways

  • The standard Medicare tax rate is 1.45 percent for employees and 1.45 percent for employers, with no wage cap.
  • Self-employed workers pay the full 2.9 percent on net self-employment income.
  • An Additional Medicare Tax of 0.9 percent applies to wages above $200,000 (single filers) or $250,000 (married filing jointly).
  • Medicare tax is withheld from your paycheck automatically if you are an employee; self-employed workers pay it through estimated taxes or when filing their return.

How Medicare tax differs from Social Security tax

Medicare tax and Social Security tax are separate payroll taxes. Social Security tax is 6.2 percent for employees (6.2 percent employer match) and applies only to wages up to a cap — $168,600 for 2024. Medicare tax has no cap, so you pay it on all your wages no matter how much you earn.

Both are withheld from your paycheck together and appear on your pay stub as FICA taxes. FICA stands for Federal Insurance Contributions Act. The money funds two different programs: Social Security retirement and disability benefits go into one fund, and Medicare hospital insurance goes into another.

The Additional Medicare Tax threshold and how it works

If your wages cross the threshold for your filing status, you owe an extra 0.9 percent on the amount above the threshold. The threshold does not adjust for inflation — it has been $200,000 (single) and $250,000 (married filing jointly) since 2013.

Your employer is required to withhold the Additional Medicare Tax once your wages hit $200,000 in a single year, regardless of your filing status. This can create a problem if you are married filing jointly but your employer does not know about your spouse's income. You may owe more tax than was withheld, and you will settle the difference when you file your return.

If you have income from multiple jobs, each employer withholds based only on what they pay you. You might end up with too much withheld, which you can claim back as a refund. Or you might have too little withheld, and you will owe when you file.

Self-employed Medicare tax and Schedule SE

If you are self-employed, you report your net earnings on Schedule SE (Self-Employment Tax) when you file your tax return. You calculate your net self-employment income by subtracting business expenses from business income. Medicare tax applies to 92.35 percent of that net amount.

You can deduct half of your self-employment tax as a business expense on your return, which lowers your taxable income. This deduction appears on Form 1040 and reduces the amount of income tax you owe, though it does not reduce the self-employment tax itself.

Many self-employed workers make quarterly estimated tax payments to avoid a large bill at tax time. These payments cover both income tax and self-employment tax. The IRS provides Form 1040-ES to help you calculate what to pay each quarter.

Medicare tax withholding on your paycheck

Your employer withholds Medicare tax automatically from each paycheck. The amount appears on your pay stub labeled as "Medicare" or "Med Tax" and is usually listed alongside Social Security withholding under the FICA section.

You cannot opt out of Medicare tax withholding — it is required by law for all employees. If you think your withholding is wrong, you can adjust it by filing a new Form W-4 with your employer, though this form controls income tax withholding, not Medicare tax.

At the end of the year, your employer reports your wages and Medicare tax withheld on your Form W-2. Box 5 shows your Medicare wages, and Box 6 shows Medicare tax withheld. You use these figures when you file your tax return to confirm the withholding was correct.

What happens if you owe Additional Medicare Tax

You discover you owe Additional Medicare Tax when you file your return and calculate your total wages for the year. If your wages exceeded the threshold and your employer did not withhold enough, you will owe the difference.

You pay this amount when you file your return or through an amended return if you filed already. There is no penalty for owing Additional Medicare Tax as long as you pay it by the tax important date. If you expect to owe it, you can increase your quarterly estimated tax payments or adjust your W-4 to have more withheld.

Frequently Asked Questions

Does Medicare tax have a wage cap like Social Security does?

No. Medicare tax applies to all your wages with no upper limit. Social Security tax stops once you hit the annual wage cap, but Medicare tax continues on every dollar you earn. This is why high earners pay significantly more in Medicare tax over their lifetime.

Can I avoid paying Medicare tax?

No. Medicare tax is mandatory for all employees and self-employed workers. There are no exemptions based on age, income, or employment type. Even if you do not use Medicare benefits, you must pay the tax.

What is the Additional Medicare Tax used for?

The Additional Medicare Tax revenue goes into the Medicare Hospital Insurance Trust Fund, the same fund that regular Medicare tax supports. It was added in 2013 as part of the Affordable Care Act to help shore up Medicare funding.

If I have two jobs, do I pay Medicare tax on both?

Yes. Each employer withholds Medicare tax on the wages they pay you. There is no limit to how much Medicare tax you can pay across multiple jobs. However, if you overpay Additional Medicare Tax because your employers did not coordinate withholding, you can claim the overpayment as a refund when you file your return.

Do I pay Medicare tax on tips?

Yes. Tips are considered wages and are subject to Medicare tax withholding. Your employer withholds based on tips you report, or you can pay the tax yourself if your employer does not withhold enough.