Medicare payroll tax is a fixed percentage of your wages that you and your employer each pay into the Medicare program

Medicare payroll tax funds the federal health insurance program for people 65 and older, some younger people with disabilities, and people with end-stage renal disease. Unlike Social Security tax, which has a wage cap, Medicare tax applies to all your earnings with no upper limit. You pay 1.45% of your wages, and your employer pays another 1.45%, for a combined rate of 2.9%. If you are self-employed, you pay both portions yourself — 2.9% total.

The tax appears on your pay stub as "Medicare" or "HI" (Hospital Insurance). Your employer withholds it automatically from each paycheck. When you file your tax return, you do not reclaim this money — it goes directly to fund Medicare benefits for current beneficiaries.

Key Takeaways

  • You pay 1.45% of all wages to Medicare tax, with no earnings cap, and your employer matches that amount.
  • Self-employed people pay the full 2.9% themselves, though they can deduct half of it on their tax return.
  • An additional 0.9% Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly), and you pay this alone without employer match.
  • Medicare tax funds Part A (hospital insurance) and is separate from Social Security tax, which has a wage limit.

The standard Medicare tax rate and how it is withheld

The standard Medicare tax rate is 1.45% on your side and 1.45% on your employer's side. This is a flat rate that does not change based on your income level or how much you earn. Your employer withholds your portion from each paycheck automatically — you do not have to request it or sign anything. The withheld amount appears as a separate line item on your pay stub.

Your employer then sends both the employee and employer portions to the Internal Revenue Service on your behalf. You do not file a separate form to pay this tax; it happens through normal payroll processing. The only time you see it again is on your annual W-2 form, which shows the total Medicare tax withheld during the year.

The additional Medicare tax on high earners

If your wages exceed certain thresholds, you owe an additional 0.9% Medicare tax on the amount above that threshold. The threshold is $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. This additional tax applies only to the employee — your employer does not match it.

Your employer will begin withholding the additional 0.9% once your year-to-date wages cross the $200,000 mark (or your filing status threshold). If you have multiple jobs, each employer withholds based only on what they pay you, so you might overpay the additional tax during the year. When you file your tax return, you can reclaim any overpayment. The IRS will reconcile what you owe based on your total household income.

How self-employed people pay Medicare tax

If you are self-employed, you pay both the employee and employer portions of Medicare tax — 2.9% total on your net self-employment income. You calculate this on Schedule SE (Self-Employment Tax) when you file your annual tax return. The amount you owe is based on your net profit from self-employment, not your gross revenue.

You can deduct half of your self-employment Medicare tax as a business expense on your tax return, which reduces your taxable income. This deduction roughly mirrors the employer-side tax that a regular employee's employer would pay. You do not send Medicare tax payments throughout the year unless you also owe estimated taxes; you settle the full amount when you file your return in April.

Medicare tax versus Social Security tax

Medicare tax and Social Security tax are two separate payroll taxes that fund two different programs. Social Security tax is 6.2% on your side (employer matches 6.2%), but it only applies to earnings up to a certain cap — $168,600 in 2024, though this cap changes yearly. Once you earn above that cap, you stop paying Social Security tax for the rest of the year.

Medicare tax has no earnings cap. You pay 1.45% on every dollar you earn, no matter how much you make. This is why high earners pay more Medicare tax over the course of a year than Social Security tax. Both taxes appear separately on your pay stub, and both are withheld automatically by your employer.

Where Medicare tax money goes

Medicare tax funds Part A of Medicare, which covers hospital stays, skilled nursing facility care, hospice, and some home health services. It does not fund Part B (doctor visits and outpatient care), Part D (prescription drugs), or Medigap plans — those are funded through different sources including premiums and general tax revenue.

The money you pay in Medicare tax today goes to pay benefits for current Medicare beneficiaries, not into a personal account for your future use. When you turn 65 and become may be able to access for Medicare, your benefits will be funded by the Medicare tax that workers are paying at that time. This is a pay-as-you-go system, similar to Social Security.

What happens if you overpay Medicare tax

If you have multiple jobs and your combined wages exceed the threshold for additional Medicare tax, you might overpay the 0.9% additional tax during the year. For example, if you earn $120,000 at one job and $100,000 at another, both employers will withhold the additional 0.9% even though your combined income is only $20,000 above the $200,000 threshold.

When you file your tax return, you report all your wages and the total additional Medicare tax withheld. The IRS will calculate what you actually owe and issue a refund if you overpaid. You do not need to do anything special — the refund is processed as part of your normal tax return.

Frequently Asked Questions

Can I opt out of paying Medicare tax?

No. Medicare tax is mandatory for all employees and self-employed people. There is no religious exemption, no hardship exemption, and no way to reduce the amount you owe. It is withheld automatically from your paycheck if you are an employee.

Does Medicare tax go into a personal account for me?

No. Medicare tax is not saved in an account with your name on it. The money you pay funds benefits for current Medicare beneficiaries. When you turn 65, your benefits will be funded by workers paying Medicare tax at that time.

What if I did not pay Medicare tax for some years?

If you were employed and your employer did not withhold Medicare tax, contact the IRS or your employer's payroll department to correct the record. If you were self-employed and did not file a tax return, you can file a late return to pay what you owe. The IRS can help you determine what years need correction.

Does the additional 0.9% Medicare tax explore to investment income?

No. The additional 0.9% Medicare tax applies only to wages and self-employment income. However, there is a separate 3.8% Medicare tax on net investment income (capital gains, dividends, interest) for high earners, but that is a different tax with different rules and thresholds.