Medicare Tax (US)
A federal payroll tax of 1.45% each for employer and employee (2.9% total), plus an Additional Medicare Tax of 0.9% on individual wages exceeding $200,000, that funds the Medicare health insurance program for Americans aged 65 and older.
- What Is Medicare Tax?
- Medicare Tax Rates and Calculation
- Additional Medicare Tax (0.9%): Rules and Withholding
- Medicare Tax Within the FICA Framework
- Medicare Tax for Self-Employed Individuals
- Wages Exempt from Medicare Tax
- Employer Medicare Tax Responsibilities
- Medicare Tax and Program Statistics [2026]
- Frequently Asked Questions About Medicare Tax
What Is Medicare Tax?
Key Takeaways
- ✓Medicare tax is a federal payroll tax that funds the Medicare program, which provides health insurance to Americans aged 65 and older, certain younger people with disabilities, and individuals with End-Stage Renal Disease.
- ✓The standard Medicare tax rate is 1.45% for the employee and 1.45% for the employer, totaling 2.9%. Unlike Social Security tax, there is no wage base limit. Every dollar of wages is subject to Medicare tax.
- ✓Since 2013, the Affordable Care Act imposed an Additional Medicare Tax of 0.9% on individual wages exceeding $200,000 (single filer), $250,000 (married filing jointly), or $125,000 (married filing separately). This additional tax is paid by the employee only.
- ✓Medicare tax is part of FICA (Federal Insurance Contributions Act), which also includes Social Security tax (6.2% each, capped at $168,600 for 2024). Together, FICA taxes total 7.65% for each party on wages up to the Social Security wage base.
- ✓Employers must withhold Medicare tax from every paycheck and remit both the employee and employer shares to the IRS. Self-employed individuals pay both halves (2.9%) through Self-Employment Contributions Act (SECA) tax.
Medicare tax is one of two components of FICA, the federal payroll tax that funds Social Security and Medicare. While Social Security tax is capped at a specific wage base ($168,600 for 2024), Medicare tax applies to all wages with no ceiling. An employee earning $50,000 pays the same 1.45% rate as one earning $500,000. This makes Medicare tax simpler to calculate than Social Security tax. There's no threshold to track, no cap to monitor, and no mid-year adjustments. The rate is flat, and it applies to every dollar from the first paycheck to the last. The only complication is the Additional Medicare Tax (0.9%) for high earners, which kicks in at $200,000 in wages from a single employer. This additional tax was introduced by the Affordable Care Act in 2013 to help fund Medicare's Hospital Insurance (Part A) trust fund, which provides inpatient hospital coverage.
Medicare Tax Rates and Calculation
Medicare tax calculation is straightforward for most employees. The complexity increases only for high earners who trigger the Additional Medicare Tax.
Standard calculation example
Employee earning $75,000 per year, paid bi-weekly ($2,884.62 per paycheck). Medicare tax withheld per paycheck: $2,884.62 x 1.45% = $41.83. Employer Medicare tax per paycheck: $2,884.62 x 1.45% = $41.83. Total Medicare tax per paycheck: $83.66. Annual employee Medicare tax: $75,000 x 1.45% = $1,087.50. Annual employer Medicare tax: $1,087.50. Total annual Medicare tax on this employee: $2,175.00.
Additional Medicare Tax calculation example
Employee earning $280,000 per year. Standard Medicare (employee): $280,000 x 1.45% = $4,060. Additional Medicare Tax (employee): ($280,000 minus $200,000) x 0.9% = $720. Total employee Medicare tax: $4,060 + $720 = $4,780. Employer Medicare (standard only, no additional): $280,000 x 1.45% = $4,060. Important: The employer does not match the Additional Medicare Tax. It's 100% the employee's obligation. The employer's only role is to withhold it from wages once the $200,000 threshold is crossed.
| Component | Employee Rate | Employer Rate | Wage Threshold |
|---|---|---|---|
| Standard Medicare Tax | 1.45% | 1.45% | All wages (no cap) |
| Additional Medicare Tax | 0.9% | None (employer does not match) | Wages above $200,000 (single filer) |
| Self-Employment Medicare Tax | 2.9% (both halves) | N/A | All net self-employment earnings |
| Self-Employment Additional Medicare Tax | 0.9% | N/A | Net SE earnings above $200,000 (single) |
Additional Medicare Tax (0.9%): Rules and Withholding
The Additional Medicare Tax creates specific withholding obligations for employers that differ from the standard Medicare tax.
Employer withholding obligation
Employers must begin withholding Additional Medicare Tax in the pay period when the employee's year-to-date wages from that employer exceed $200,000. This is a flat $200,000 threshold regardless of filing status. An employee who is married filing jointly with a $250,000 threshold won't have that reflected in payroll. The employer uses $200,000 for all employees. If the employee's actual threshold is different (due to filing status or combined income with a spouse), they reconcile on their individual tax return (Form 1040). Employers report Additional Medicare Tax withheld on Form 941 (quarterly) and the employee's Form W-2.
Filing status thresholds for individuals
While employers use $200,000 for all employees, the actual thresholds for individual tax liability are: Single or Head of Household: $200,000. Married Filing Jointly: $250,000 (based on combined wages). Married Filing Separately: $125,000. This means a married employee earning $190,000 whose spouse also earns $190,000 owes Additional Medicare Tax on their combined $380,000 minus $250,000 = $130,000, even though neither employer withheld the additional tax (each was below $200,000). They'll owe $1,170 ($130,000 x 0.9%) when they file their return.
Medicare Tax Within the FICA Framework
Medicare tax is one half of FICA. Understanding how it interacts with Social Security tax gives payroll teams the full picture.
| FICA Component | Employee Rate | Employer Rate | 2024 Wage Base |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | $168,600 (wages above this are exempt) |
| Medicare (HI) | 1.45% | 1.45% | No limit (all wages subject) |
| Additional Medicare | 0.9% | 0% | > $200,000 (employee only) |
| Total FICA (on first $168,600) | 7.65% | 7.65% | |
| Total FICA (on wages above $168,600) | 1.45% | 1.45% | (+ 0.9% employee above $200K) |
Medicare Tax for Self-Employed Individuals
Self-employed individuals pay both the employee and employer portions of Medicare tax through the Self-Employment Contributions Act (SECA).
SECA Medicare calculation
Self-employed individuals pay 2.9% Medicare tax on 92.35% of their net self-employment earnings. The 92.35% adjustment mirrors the fact that employees don't pay FICA on the employer's share. Example: A freelancer with $120,000 in net self-employment income pays Medicare tax on $120,000 x 92.35% = $110,820. Medicare tax: $110,820 x 2.9% = $3,213.78. If net SE earnings exceed $200,000, the Additional Medicare Tax of 0.9% also applies to the excess. The deductible half of self-employment tax (reported on Form 1040, Schedule SE) reduces adjusted gross income but does not reduce net earnings for Medicare tax purposes.
Wages Exempt from Medicare Tax
While Medicare tax applies to nearly all compensation, a few narrow categories of wages are exempt.
- Student FICA exemption: Students employed by the school, college, or university where they are enrolled at least half-time are exempt from FICA (including Medicare) under IRC Section 3121(b)(10). This applies to both graduate and undergraduate student workers.
- Foreign government employees: Employees of foreign governments performing official duties in the US are generally exempt from FICA taxes under IRC Section 3121(b)(11).
- Certain non-resident aliens: Non-resident aliens (NRAs) on F-1, J-1, M-1, or Q-1/Q-2 visa statuses are exempt from FICA for a specified period (generally 5 calendar years for F-1 and J-1 students). After the exemption period, they become subject to FICA like any other employee.
- Wages paid to newspaper carriers under age 18 are exempt from FICA.
- Qualified retirement plan contributions and certain pre-tax deductions (like health insurance premiums under a Section 125 cafeteria plan) reduce wages for income tax purposes but NOT for FICA purposes. Medicare tax applies to these amounts.
Employer Medicare Tax Responsibilities
Employers have specific withholding, depositing, and reporting obligations for Medicare tax that differ slightly from income tax withholding.
Deposit schedules
FICA taxes (including Medicare) must be deposited on a schedule determined by the employer's total tax liability. Monthly depositors (those with $50,000 or less in tax liability during the lookback period) deposit by the 15th of the following month. Semi-weekly depositors (above $50,000) deposit on Wednesday or Friday following the payroll date, depending on which day payday falls. All deposits must be made electronically through EFTPS (Electronic Federal Tax Payment System). Paper checks are not accepted for federal payroll tax deposits.
Reporting requirements
Form 941 (Employer's Quarterly Federal Tax Return): Reports total wages, total Medicare tax withheld (employee + employer share), and Additional Medicare Tax withheld. Filed quarterly by the last day of the month following the quarter end. Form W-2 (Wage and Tax Statement): Box 5 reports Medicare wages, Box 6 reports Medicare tax withheld. If Additional Medicare Tax was withheld, it's included in Box 6 (not separately broken out on the W-2). Form W-3 (Transmittal of Wage and Tax Statements): Annual summary filed with the SSA, reconciling total Medicare wages and taxes across all W-2s.
Medicare Tax and Program Statistics [2026]
Key data about Medicare tax collections and the Medicare program it funds.
Frequently Asked Questions
Is there a wage cap for Medicare tax like there is for Social Security?
Does the employer pay Additional Medicare Tax?
Do employer-paid health insurance premiums get Medicare tax?
How does Medicare tax work for employees with multiple jobs?
Is Medicare tax deductible on my income tax return?
Written by Adithyan RK