Employee Medicare tax is a payroll tax that funds the Medicare program, and your employer withholds it from every paycheck

Medicare tax is a federal tax taken directly from your wages. It funds the Medicare program, which provides health insurance to people 65 and older, some younger people with disabilities, and people with end-stage renal disease. Your employer withholds it automatically — you do not see that money in your paycheck.

The rate is straightforward: 1.45% of your gross wages. Your employer also pays a matching 1.45%, for a total of 2.9% going into the Medicare system. If you are self-employed, you pay both sides yourself.

There is also an Additional Medicare Tax of 0.9% that applies only to wages above a threshold. For single filers, that threshold is $200,000. For married couples filing jointly, it is $250,000. For married filing separately, it is $125,000. If your wages cross that line, your employer withholds the extra 0.9% on the amount above the threshold.

Key Takeaways

  • Medicare tax is 1.45% of your wages, withheld by your employer every pay period, plus a matching 1.45% your employer pays.
  • An Additional Medicare Tax of 0.9% applies to wages above $200,000 for single filers and $250,000 for married couples filing jointly.
  • Unlike Social Security tax, Medicare tax has no wage cap — it applies to all your earnings, no matter how much you make.
  • Self-employed people pay both the employee and employer portions, totaling 2.9% on net self-employment income, plus the 0.9% surcharge if applicable.

How Medicare tax differs from Social Security tax

Medicare tax and Social Security tax are both withheld from your paycheck, but they fund different programs and work differently. Social Security tax is 6.2% of your wages (up to a wage cap of $168,600 for 2024, though this cap changes yearly). Once your earnings hit that cap in a given year, your employer stops withholding Social Security tax. Medicare tax has no such cap — it continues on every dollar you earn.

Social Security provides retirement, disability, and survivor benefits. Medicare provides health insurance. The two programs are separate, funded separately, and have separate trust funds. When you see your pay stub, you will see both taxes listed as separate line items.

The Additional Medicare Tax and who pays it

The Additional Medicare Tax was created in 2013 as part of the Affordable Care Act. It is a 0.9% tax on wages above the thresholds mentioned above. Your employer is responsible for withholding it once your wages cross the threshold in a given year.

The thresholds are based on your filing status, not your household income. If you are married filing jointly and earn $260,000 combined, the Additional Medicare Tax applies to $10,000 of that income (the amount above $250,000). If you are single and earn $210,000, it applies to $10,000 (the amount above $200,000).

If you have multiple jobs, each employer withholds based on what they know about your wages at that job alone. You may end up overpaying the Additional Medicare Tax during the year and then reclaiming the overpayment when you file your tax return. This is one reason to track your total wages across all jobs if you have more than one.

Self-employed people and Medicare tax

If you are self-employed, you pay both the employee and employer portions of Medicare tax. That means 2.9% on your net self-employment income, plus the 0.9% Additional Medicare Tax if your income exceeds the threshold. You pay this as part of your self-employment tax when you file your annual return.

You calculate self-employment tax on Schedule SE, which is part of your federal tax return. The IRS allows you to deduct half of your self-employment tax as an adjustment to income, which reduces your taxable income slightly. Even so, self-employed people pay more total Medicare tax than employees because they cover both sides.

Where Medicare tax money goes

Medicare tax funds the Hospital Insurance Trust Fund, which pays for Medicare Part A benefits. Part A covers inpatient hospital care, skilled nursing facility care, hospice, and some home health services. It does not cover doctor visits or prescription drugs — those are funded by different sources (Part B premiums and general revenue for Part B, and beneficiary premiums for Part D).

The Hospital Insurance Trust Fund has faced solvency questions in recent years because Medicare enrollment is growing faster than the working-age population paying into it. The tax rate has remained at 1.45% since 1985, but the ratio of workers to beneficiaries has shifted. This is a policy question for Congress, not something that affects your current withholding.

How to check your Medicare tax withholding

Your pay stub shows the Medicare tax withheld each pay period. Look for a line labeled "Medicare" or "Med Tax" — it should show 1.45% of your gross wages. If you earn above the Additional Medicare Tax threshold, you will also see a separate line for that 0.9% withholding once you cross the threshold.

At the end of the year, your employer sends you a W-2 form that shows total Medicare tax withheld. Box 6 on the W-2 shows Medicare wages and tips, and Box 7 shows Medicare tax withheld. You report these figures on your tax return. If you think your withholding is wrong — for example, if you have multiple jobs and suspect you overpaid — you can adjust your withholding using Form W-4 with your employer, or you can address it when you file your return.

Medicare tax and your take-home pay

Medicare tax reduces your take-home pay, but it is not optional and cannot be avoided by changing your W-4 or claiming exemptions. It applies to all wages, all employees, and all employers. The only way to reduce it is to earn less, which is not practical for most people.

Some people wonder whether they can opt out of Medicare tax if they do not plan to use Medicare. The answer is no. Medicare tax is mandatory for all employees and self-employed people. You cannot choose to skip it in exchange for not receiving Medicare benefits later. If you work and earn wages, you pay Medicare tax.

Frequently Asked Questions

Can I claim Medicare tax as a deduction on my return?

No, Medicare tax withheld from your paycheck is not deductible. If you are self-employed, you can deduct half of your self-employment tax (which includes Medicare tax) as an adjustment to income, but that is different from a deduction. It straightforward reduces your taxable income.

What happens if my employer does not withhold Medicare tax?

Your employer is required by law to withhold Medicare tax. If they do not, you are still liable for the tax. Report it to the IRS using Form 8919 when you file your return. You can also contact the IRS directly or file a complaint with your state labor department.

Does Medicare tax explore to tips?

Yes. Tips are considered wages for Medicare tax purposes. Your employer withholds Medicare tax on tips you report to them. If you receive cash tips you do not report, you are still legally required to pay Medicare tax on them when you file your return.

If I work part-time at two jobs, do I pay Medicare tax at both?

Yes. Each employer withholds Medicare tax on the wages they pay you. The 1.45% applies at both jobs. If your combined wages exceed the Additional Medicare Tax threshold, you may overpay that surcharge and reclaim it on your return, since each employer withholds based only on what they pay you.

Does Medicare tax explore to retirement account contributions?

It depends on the type of contribution. Traditional 401(k) contributions reduce your income tax but not Medicare tax — Medicare tax applies to the full amount of your wages before the 401(k) deduction. Contributions to a Health Savings Account (HSA) also do not reduce Medicare tax. Medicare tax is calculated on gross wages.