Medicare tax is a payroll tax that funds the Medicare health insurance program for people 65 and older

Medicare tax appears on your paycheck as a line item, separate from federal income tax. Your employer withholds it automatically, and you pay a matching amount yourself — the total is 2.9 percent of your wages. If you are self-employed, you pay the full 2.9 percent yourself. There is also an additional 0.9 percent Medicare tax on wages above a certain threshold, which applies to higher earners.

The money you pay goes into a trust fund that pays for hospital insurance (Part A), which covers inpatient hospital stays, skilled nursing, hospice, and some home health care. Medicare tax does not fund Medicare Part B (doctor visits) or Part D (prescription drugs) — those come from general tax revenue and premiums paid by beneficiaries.

You do not need to do anything to pay Medicare tax. Your employer or payroll processor handles the withholding. The amount you pay is based on your gross wages, not your income after deductions.

Key Takeaways

  • Medicare tax is 2.9 percent of your wages, split equally between you and your employer, plus an additional 0.9 percent on earnings above $200,000 (single) or $250,000 (married filing jointly).
  • The tax is withheld automatically from your paycheck and appears as a separate line item labeled "Medicare" or "HI" (Hospital Insurance).
  • If you are self-employed, you pay both the employee and employer portions, totaling 3.8 percent on net self-employment income.
  • Medicare tax funds only Part A (hospital insurance); it does not pay for doctor visits, prescription drugs, or other Medicare benefits.
  • You cannot opt out of Medicare tax — it is mandatory for all wage earners and self-employed individuals.

The two parts of Medicare tax: standard and additional

The standard Medicare tax rate is 2.9 percent of wages. Your employer withholds 1.45 percent from your paycheck and pays 1.45 percent on your behalf. This has been the rate since 1966 and does not change based on your income.

The additional Medicare tax is 0.9 percent and applies only to wages above a threshold. For single filers, the threshold is $200,000. For married couples filing jointly, it is $250,000. For married filing separately, it is $125,000. Once your wages cross that line in a calendar year, your employer withholds the extra 0.9 percent on all wages above the threshold for the rest of that year. If you are self-employed, you owe the additional tax on net self-employment income above the same thresholds.

The additional Medicare tax was created in 2013 as part of the Affordable Care Act. It applies to high earners and generates revenue specifically for Medicare Part A.

How Medicare tax works if you are self-employed

Self-employed people pay both the employee and employer portions of Medicare tax. The combined rate is 2.9 percent on net self-employment income, plus the additional 0.9 percent if your income exceeds the threshold for your filing status.

You calculate self-employment tax on Schedule SE (Self-Employment Tax), which is part of your tax return. You report your net profit from self-employment, multiply it by 92.35 percent (to account for the employer portion deduction), and then apply the Medicare tax rate. You can deduct half of your self-employment tax as a business expense on your return, which reduces your taxable income.

Self-employed people pay their Medicare tax when they file their annual return or through quarterly estimated tax payments. If you owe a large amount, the IRS may require you to pay in installments throughout the year to avoid penalties.

What happens if you work for multiple employers

If you work for more than one employer in the same year, each employer withholds the standard 1.45 percent Medicare tax from your paycheck. There is no limit to how much standard Medicare tax you can pay — if you earn $100,000 from one job and $100,000 from another, both employers withhold Medicare tax on the full amount.

The additional 0.9 percent Medicare tax is different. If your combined wages from all employers exceed the threshold for your filing status, you may have overpaid the additional tax during the year. When you file your return, you report all wages and recalculate the additional tax owed. If you overpaid, you receive a refund. If you underpaid, you owe the difference.

This situation is common for people who change jobs mid-year or work multiple part-time positions. Keep track of your total wages across all employers so you can report them correctly on your return.

Medicare tax and Social Security tax are different

Medicare tax and Social Security tax are two separate payroll taxes that appear on your paycheck. Social Security tax is 6.2 percent (employee) plus 6.2 percent (employer), for a total of 12.4 percent. It applies only to wages up to an annual cap, which changes each year. In 2024, the cap is $168,600, meaning you stop paying Social Security tax once your wages reach that amount.

Medicare tax has no wage cap. You pay 2.9 percent on all your wages, no matter how much you earn. This is why high earners pay more Medicare tax than Social Security tax over the course of a year.

Both taxes fund different programs. Social Security tax funds retirement, disability, and survivor benefits. Medicare tax funds hospital insurance for people 65 and older. You cannot opt out of either one.

Why Medicare tax matters for your taxes

Medicare tax affects your take-home pay and your tax return. On your paycheck, it reduces the amount of money you receive. Over a year, the standard 1.45 percent adds up — on a $50,000 salary, you pay about $725 in Medicare tax.

On your tax return, Medicare tax matters most if you are self-employed or if you worked for multiple employers. Self-employed people use Schedule SE to calculate the tax and can deduct half of it. People with multiple jobs need to reconcile the additional Medicare tax withheld across all employers and claim a refund or pay more if needed.

If you have questions about how much Medicare tax you paid, check your W-2 form (for employees) or your Schedule SE (for self-employed). Your W-2 shows Medicare wages and Medicare tax withheld. Your tax software or tax preparer can help you verify the amounts are correct.

Frequently Asked Questions

Can I get a refund of Medicare tax I already paid?

You cannot get a refund of the standard 1.45 percent Medicare tax. Once you pay it, the money goes to the Medicare trust fund. However, if you overpaid the additional 0.9 percent Medicare tax due to working multiple jobs, you can claim a refund when you file your return. The IRS will recalculate based on your total wages and issue a refund if you overpaid.

Does Medicare tax apply to all types of income?

Medicare tax applies to wages and self-employment income. It does not apply to investment income, interest, dividends, capital gains, or rental income. If you have a mix of wage income and investment income, you pay Medicare tax only on the wages and self-employment portion.

What if I did not pay Medicare tax because I was exempt?

Certain groups, such as some religious communities and non-resident aliens, may be exempt from Medicare tax. If you are exempt, your employer should not withhold it. If you believe you are exempt and your employer is still withholding, contact your employer's payroll department or the IRS to clarify your status.

Does Medicare tax go toward my future Medicare benefits?

Medicare tax you pay now goes into the Hospital Insurance Trust Fund, which pays benefits for current Medicare beneficiaries. When you turn 65, your benefits come from the same fund, paid by workers at that time. It is a pay-as-you-go system, not an individual savings account. Your Medicare tax history does affect whether you are covered, but the amount you paid does not determine your benefit amount.