Medicare Tax Rate
The Medicare tax rate is 2.9% of all earned income, split evenly between employee and employer at 1.45% each. Self-employed individuals pay the full 2.9% themselves. High earners pay an additional 0.9% Medicare surtax on wages above $200,000 (single filers) or $250,000 (married filing jointly), bringing their total Medicare tax to 3.8% on income over those thresholds.
How do I calculate the Medicare tax I owe on my paycheck?
You pay 1.45% of your gross wages as the employee portion of Medicare tax. Your employer withholds this amount automatically from every paycheck and pays a matching 1.45%, making the total 2.9%.
What is the Additional Medicare Tax and when does it apply?
The Additional Medicare Tax is a 0.9% surtax on earned income above specific thresholds: $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married filing separately. This surtax applies only to the employee—there is no employer match.
How does Medicare tax work for self-employed individuals?
Self-employed people pay the full 2.9% Medicare tax as part of self-employment tax, calculated on 92.35% of net self-employment income. If your Schedule C shows $80,000 in net profit, you pay Medicare tax on $73,880 ($80,000 × 0.9235), which equals $2,143 ($73,880 × 0.029).
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Do Medicare taxes apply to investment income or only wages?
Medicare tax applies only to earned income: wages, salaries, tips, bonuses, and net self-employment income. It does not apply to investment income such as dividends, interest, capital gains, or rental income.
What should I check to ensure my employer is withholding Medicare tax correctly?
Review every pay stub to confirm a 1.45% deduction labeled "Medicare" or "FICA-Medicare." Multiply your gross pay by 0.0145—the result should match the withheld amount. If your year-to-date earnings exceed $200,000, verify an additional 0.9% withholding appears on income above that level.
How do I report and pay Medicare tax if I have both W-2 and self-employment income?
You pay 1.45% on W-2 wages through withholding, plus the full 2.9% on net self-employment income via Schedule SE. The Additional Medicare Tax threshold applies to your combined income.
FAQ
Is there a wage limit on Medicare tax like Social Security?
No. Social Security tax has a wage base limit ($160,200 for 2023, $168,600 for 2024), but Medicare tax applies to every dollar of earned income with no cap.
Can I get a refund if too much Medicare tax was withheld?
Yes. If your employer over-withheld—rare but possible due to payroll errors—you will receive a refund when you file your tax return.
Do I pay Medicare tax on unemployment benefits or Social Security benefits?
No. Unemployment compensation and Social Security benefits are not earned income, so they are not subject to Medicare tax.
What happens if I underpay Medicare tax through estimated payments?
The IRS assesses an underpayment penalty, typically calculated quarterly using Form 2210. To avoid penalties, ensure your total withholding plus estimated payments equal at least 90% of your current year tax liability or 100% of last year's (110% if your adjusted gross income exceeded $150,000).
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