The Medicare payroll tax rate is 1.45% of your wages, withheld from every paycheck and matched by an equal 1.45% from your employer, for a combined 2.9%.1Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Unlike Social Security tax, it applies to every dollar you earn with no annual cap. Higher earners also pay an extra 0.9% on wages above a threshold set by filing status. Together these taxes fund Medicare Part A, the hospital insurance you become eligible for at 65.
What the 1.45% Applies To
The base Medicare tax comes out of all covered wages: salary, overtime, bonuses, commissions, and tips.1Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates There is no point in the year when the withholding pauses or resets. That is the main structural difference from Social Security tax, which stops once your year-to-date wages hit the annual wage base ($184,500 in 2026).2Social Security Administration. Contribution and Benefit Base Medicare tax has no ceiling. Whether you earn $30,000 or $3 million, every dollar gets taxed at 1.45%.
The math on your paycheck is straightforward: gross wages multiplied by 0.0145 equals what your employer withholds. Your employer sends that amount, plus its own matching 1.45%, to the IRS on your behalf.
The Additional 0.9% for High Earners
On top of the 1.45%, an extra 0.9% applies to wages above a threshold that depends on how you file:3Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
- Single filers: 0.9% on wages above $200,000
- Married filing jointly: 0.9% on combined wages above $250,000
- Married filing separately: 0.9% on wages above $125,000
Only the amount above the threshold is subject to the surcharge. A single filer earning $240,000 pays the extra 0.9% on $40,000, not on the full amount. Your employer does not match this surcharge; it falls entirely on you.3Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
Why Your Withholding May Not Match What You Owe
Your employer is required to start withholding the 0.9% once your wages at that job cross $200,000 for the year, no matter what your actual filing status is. Your employer doesn’t know whether you’re married filing jointly or separately, so the $200,000 trigger applies to everyone at the withholding stage.4Internal Revenue Service. Instructions for Form 8959
That creates two common mismatches. If you’re married filing jointly and your household income tops $250,000 but neither of you individually earns over $200,000, no employer will withhold the surcharge, yet you’ll still owe it in April. If you’re married filing separately, your threshold is $125,000, but employer withholding doesn’t start until $200,000. In both situations you may need to make estimated tax payments during the year to avoid an underpayment penalty.
You reconcile the difference on Form 8959, filed with your annual return. If your employer over-withheld, the excess becomes a credit against your total tax. If you under-paid, the balance is due with the return.4Internal Revenue Service. Instructions for Form 8959
If You’re Self-Employed
When you work for yourself, you pay both halves of Medicare tax, a combined 2.9%, under the Self-Employment Contributions Act. The tax applies to 92.35% of your net self-employment earnings, not the full amount. That factor mirrors the advantage W-2 employees get because their employer’s share of FICA isn’t part of their taxable wages.
You calculate the tax on Schedule SE and file it with Form 1040. You can then deduct the employer-equivalent half of your self-employment tax from your adjusted gross income, a deduction that appears on Schedule 1.
The 0.9% surcharge reaches self-employed workers too. Once your net self-employment income, combined with any wages, exceeds $200,000 for single filers or $250,000 for joint filers, the extra 0.9% applies to the excess.3Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax The Additional Medicare Tax is not deductible. If you don’t cover it through quarterly estimated payments, expect an underpayment penalty.
What Counts as Medicare-Taxable Wages
Most compensation is subject to Medicare tax. Non-cash fringe benefits are generally taxable too, unless a specific tax code provision excludes them.5Internal Revenue Service. Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits A few items catch people off guard:
- Group-term life insurance provided by your employer, for coverage above $50,000, is included in wages for Medicare tax purposes.5Internal Revenue Service. Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits
- Employer adoption assistance is subject to Medicare tax even though it may be excluded from income tax.
- A 2%-or-greater shareholder in an S corporation generally cannot exclude fringe benefits the way regular employees can, so those benefits are treated as wages subject to Medicare tax.5Internal Revenue Service. Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits
On the other side, pre-tax contributions to a Section 125 cafeteria plan, like the amount taken from your paycheck for employer-sponsored health insurance or a flexible spending account, are generally not subject to Medicare tax.6Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans If you elect cash instead of a qualified benefit, that cash becomes taxable wages.
Who Is Exempt From Medicare Tax
Most workers cannot opt out of Medicare tax. A few narrow exemptions exist.
Students Working for Their School
If you’re enrolled at least half-time at a college or university and work for that same institution, your wages are exempt from FICA taxes, including Medicare. The work must be incidental to your studies. You lose the exemption if you’re eligible for benefits like employer retirement contributions, vacation pay, or most types of reduced tuition, other than the tuition reduction given to graduate teaching and research assistants.7Internal Revenue Service. Student FICA Exception
Nonresident Aliens on Student or Exchange Visas
Foreign students and scholars in F-1, J-1, or M-1 status who have been in the United States for fewer than five calendar years are generally exempt from Medicare tax on wages from qualifying employment, including on-campus work, authorized off-campus employment, and practical training. After five calendar years, once you meet the substantial presence test and become a resident alien for tax purposes, the exemption ends.8Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
Members of Certain Religious Groups
Members of recognized religious groups conscientiously opposed to insurance benefits, including groups like the Amish and Mennonites, can apply for an exemption by filing Form 4029 with the Social Security Administration. The group must have continuously provided for its members’ food, shelter, and medical care since at least December 31, 1950. The individual permanently waives all rights to Social Security and Medicare benefits, including premium-free Medicare Part A.9Social Security Administration. Are Members of Religious Groups Exempt From Paying Social Security Taxes?
What Paying the Tax Buys You
Medicare tax throughout your working life is what earns you premium-free Medicare Part A at 65. The requirement is 40 quarters of Medicare-taxed work, roughly 10 years. Each calendar quarter in which you earn enough to receive a work credit counts. If you fall short, you can still enroll in Part A, but you’ll pay a monthly premium.
All Medicare taxes flow into the Hospital Insurance Trust Fund, which pays for Part A benefits like inpatient hospital stays, skilled nursing care, and hospice. The 2025 Medicare Trustees Report projects the fund will be depleted by 2033.10Centers for Medicare and Medicaid Services. 2025 Medicare Trustees Report Depletion would not end Medicare, since incoming payroll taxes would still cover a portion of benefits, but the fund could not pay full claims without Congressional action.
The 3.8% Net Investment Income Tax Is Not a Medicare Tax
A separate 3.8% tax applies to net investment income for individuals whose modified adjusted gross income exceeds the same thresholds used for the Additional Medicare Tax: $200,000 single, $250,000 joint, $125,000 married filing separately.11Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax It covers interest, dividends, rental income, capital gains, and certain passive business income.
Because the thresholds match and both taxes came from the same legislation, the Net Investment Income Tax is often called a “Medicare surtax.” It isn’t one. The NIIT sits under a different section of the tax code, and its revenue goes to the general treasury, not the Medicare trust fund. The practical point: the Additional Medicare Tax applies to earned income like wages and self-employment profits, while the NIIT applies to investment income. A high earner can owe both in the same year on different portions of their income.