Not everyone pays Medicare tax, but most working people do

If you work as an employee, you pay Medicare tax on your wages — 1.45% goes to Medicare, taken straight from your paycheck. Your employer matches that amount. But certain groups don't pay it at all: some religious communities that have opted out, certain government employees hired before 1983, and railroad workers (who pay into a separate system). Self-employed people pay both the employee and employer share, which comes to 2.9% of net earnings. The key dividing line is whether you have earned income from work.

Medicare tax has no income cap, unlike Social Security tax. You pay it on every dollar you earn, no matter how much you make in a year. There is also an additional 0.9% Medicare tax on high earners — this kicks in at $200,000 for single filers and $250,000 for married couples filing jointly — but that is separate from the base Medicare tax everyone else pays.

Key Takeaways

  • Employees pay 1.45% Medicare tax on all wages, with no upper limit on how much you owe.
  • Self-employed people pay 2.9% Medicare tax on net business earnings because they cover both the employee and employer portions.
  • Members of certain religious groups that have received IRS approval can be exempt from Medicare tax, but this requires a formal opt-out process.
  • Federal employees hired before 1983 and railroad workers are not subject to standard Medicare tax because they participate in different retirement systems.
  • High earners pay an additional 0.9% Medicare tax on income above $200,000 (single) or $250,000 (married filing jointly).

How Medicare tax works for W-2 employees

When you work for an employer and receive a W-2 form at tax time, Medicare tax is already deducted from your paychecks. You will see it listed separately on your pay stub as "Medicare" or "FICA Medicare." Your employer sends that money to the IRS on your behalf, along with their matching contribution. The total that goes to Medicare is 2.9% of your gross wages — you pay half, they pay half.

This happens automatically and you cannot opt out. The only exception is if you are a member of a recognized religious sect that opposes insurance, including Medicare, and you have filed Form 8274 with the IRS to claim exemption. Even then, you must have been a member of that sect continuously since before 1985.

Self-employed people and Medicare tax

If you are self-employed — a freelancer, contractor, or small business owner — you pay the full 2.9% Medicare tax yourself. You do not have an employer to split the cost, so you cover both sides. This is calculated on your net business income (revenue minus business expenses) and is reported on Schedule SE when you file your taxes.

Self-employed Medicare tax is due whether you owe income tax or not. Even if your business loses money overall, you still owe Medicare tax on any net profit. You can deduct half of your self-employment tax as a business expense on your tax return, which provides some offset, but you still pay the full amount upfront.

Government employees and railroad workers

Federal employees hired before 1983 do not pay Medicare tax. Instead, they participate in the Civil Service Retirement System (CSRS), a pension plan that predates Medicare. Federal employees hired in 1983 or later pay Medicare tax and participate in the Federal Employees Retirement System (FERS).

Railroad workers do not pay standard Medicare tax either. They pay into the Railroad Retirement Tax Act (RRTA) system, which is a separate program run by the Railroad Retirement Board. The RRTA includes retirement, disability, and survivor benefits similar to Social Security and Medicare combined, so railroad employees are covered under that system instead.

Religious exemptions from Medicare tax

Members of certain religious groups can be exempt from Medicare tax if their faith opposes insurance, including government insurance programs. To claim this exemption, you must file Form 8274 (Exemption from Self-Employment Tax for Use by Members of Certain Religious Sects) with the IRS. You must also have been a continuous member of the sect since before January 1, 1985.

This exemption is rare and applies only to specific recognized groups. The IRS maintains a list of sects that have been approved for this exemption. If you think you may have access to, you will need to provide documentation of your membership and beliefs to the IRS. Once approved, you are exempt from both the employee and employer portions of Medicare tax.

The additional Medicare tax on high earners

On top of the standard 1.45% Medicare tax, there is an additional 0.9% Medicare tax that applies to high earners. This extra tax kicks in when your wages exceed $200,000 in a year (if you are single), $250,000 (if you are married filing jointly), or $125,000 (if you are married filing separately). Your employer withholds this additional tax automatically once you cross that threshold.

The additional Medicare tax applies to both W-2 employees and self-employed people. If you are self-employed, you report it on Schedule SE along with your regular self-employment tax. Unlike regular Medicare tax, the additional tax is not matched by employers — it comes entirely from the employee or self-employed person's income.

What happens if you do not pay Medicare tax

If you are supposed to pay Medicare tax and do not, the IRS will pursue you for the unpaid amount plus penalties and interest. For employees, this is not usually an issue because the tax is withheld automatically. For self-employed people, failing to pay self-employment tax can result in significant back taxes and penalties if the IRS audits your return.

If you believe you are exempt — for example, because you are part of a recognized religious sect — you must have the proper documentation on file with the IRS. straightforward not paying without an approved exemption will trigger collection action. If you have questions about whether you owe Medicare tax, a tax professional or your local IRS office can review your situation.

Frequently Asked Questions

Can I opt out of Medicare tax if I do not plan to use Medicare?

No, you cannot opt out based on personal choice. The only legal exemptions are for members of recognized religious sects that oppose insurance and have filed the proper forms with the IRS before 1985. Everyone else who has earned income must pay Medicare tax.

Do I pay Medicare tax on unemployment benefits or Social Security?

No. Medicare tax applies only to earned income from work — wages, self-employment income, and tips. Unemployment benefits, Social Security, pensions, and investment income are not subject to Medicare tax.

What if I work for two employers in the same year?

Each employer withholds Medicare tax on your wages from them. There is no cap on Medicare tax, so you will owe tax on all wages from all jobs combined. You do not get a refund if you overpay, but you also do not owe extra if you work multiple jobs.

Do nonresident aliens pay Medicare tax?

Nonresident aliens who work in the United States and have a valid work visa pay Medicare tax on their U.S. wages, just like citizens and permanent residents. The rules depend on your visa status and tax treaty between your home country and the U.S. — consult a tax professional if you are unsure.

Is Medicare tax the same as Social Security tax?

No, they are separate taxes. Social Security tax is 6.2% (employee) and has an annual wage cap — in 2024 you stop paying after earning $168,600. Medicare tax is 1.45% with no cap. Both are withheld from paychecks and shown separately on your pay stub.