Medicare Tax Rates, Thresholds, and Additional Tax Rules

The Medicare tax rate is 1.45% of wages for employees, matched by another 1.45% from the employer, for a combined 2.9% on every dollar earned. Unlike Social Security tax, there is no income ceiling: the rate applies to your first dollar and your millionth alike.¹ Higher earners pay an additional 0.9% surtax on wages above certain thresholds, and a separate 3.8% tax can apply to investment income. Self-employed workers pay the full 2.9% themselves.

The Base Rate on Wages

If you work for an employer, 1.45% of your gross wages comes out of each paycheck for Medicare.² Your employer pays a matching 1.45%, bringing the total to 2.9%.³ On your pay stub, the employee portion sits alongside Social Security withholding under the FICA label.

The key contrast with Social Security is the missing cap. Social Security tax stops at the annual wage base ($184,500 in 2026), but Medicare’s 1.45% keeps applying no matter how high your income goes.⁴ Someone earning $500,000 pays the same 1.45% on their last dollar as on their first.

The 0.9% Additional Medicare Tax

Once your wages cross a threshold based on filing status, an extra 0.9% surtax applies to the portion above the threshold.² The thresholds are $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for single filers, heads of household, and qualifying surviving spouses.

Only the employee pays the 0.9%. Employers do not match it. A single filer earning $300,000 pays 1.45% on the full $300,000 plus 0.9% on the $100,000 above the $200,000 threshold, for $5,250 in total employee-side Medicare tax that year.

Why Withholding May Not Match What You Owe

Your employer does not know your filing status or your spouse’s income, so the withholding rule is mechanical: the extra 0.9% starts coming out of your paycheck once a single employer pays you more than $200,000 in a calendar year, whatever your actual filing situation.⁵ Each employer looks only at what it pays you.

That produces mismatches in both directions. A married couple filing jointly with $240,000 in combined wages owes no surtax, but if one spouse earned $210,000, that spouse’s employer already withheld 0.9% on $10,000. In the other direction, two spouses each earning $180,000 owe surtax on $110,000 of joint income above $250,000, yet neither employer withheld anything because neither paid above $200,000. You can cover a shortfall by asking your employer to withhold additional income tax on Form W-4 or by making estimated tax payments.⁶ The reconciliation happens on Form 8959, filed with your return.⁷

The 3.8% Net Investment Income Tax

A separate 3.8% Net Investment Income Tax applies once your modified adjusted gross income crosses the same threshold amounts: $250,000 joint, $125,000 married filing separately, $200,000 for everyone else.⁸ It reaches capital gains, dividends, interest, rental income, royalties, and passive business income. Wages and active self-employment income are not subject to it, because those already carry their own Medicare taxes.

The 3.8% is charged on the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold. A single filer with $180,000 in wages and $50,000 in investment income has a modified adjusted gross income of $230,000. The excess over $200,000 is $30,000, which is less than the $50,000 of investment income, so the 3.8% applies to $30,000, producing $1,140 in tax. The calculation goes on Form 8960.⁹

Self-Employment: You Pay Both Halves

When you work for yourself, there is no employer to cover the other 1.45%, so you pay the full 2.9% on your self-employment income. The 0.9% Additional Medicare Tax applies once your self-employment earnings cross the same thresholds.¹⁰ If you also earn wages from a regular job, those wages reduce the threshold available to your self-employment income, so combined earnings are effectively measured against one limit.

Two adjustments soften the hit. First, you calculate the tax on 92.35% of your net earnings, not 100%.¹¹ The adjustment mirrors the treatment employees get, since an employer’s share of FICA is not counted as wages to the worker. On $100,000 of net self-employment income, the Medicare portion is figured on $92,350. Second, you can deduct the employer-equivalent share of your self-employment tax when calculating adjusted gross income.¹² The deduction reduces your income tax, not the self-employment tax itself, and appears on Form 1040 rather than Schedule C. The full calculation goes on Schedule SE with your annual return.¹³

Who Is Exempt

Almost everyone with wages or self-employment income pays Medicare tax. The exemptions are narrow.

Students employed by the school where they are enrolled at least half-time can be exempt on wages tied to their course of study. The exemption disappears if the student qualifies as a professional employee by receiving benefits like retirement plan participation or paid vacation.¹⁴
Nonresident alien students on F-1, J-1, or M-1 visas who have been in the United States fewer than five calendar years are generally exempt on wages from on-campus employment or authorized off-campus work. Their spouses and dependents are not covered by the exemption.¹⁵
Members of recognized religious sects that oppose accepting Social Security and Medicare benefits can apply for an exemption using Form 4029. Approval requires waiving all future benefits under both programs.¹⁶

Outside these categories, there is no opt-out. Retirees who return to work pay Medicare tax on those wages even if they are already receiving Medicare benefits.

How the Tax Gets Paid

For employees, reporting is automatic. The employer withholds 1.45% each pay period and remits it. If you owe the Additional Medicare Tax, Form 8959 reconciles any gap between what was withheld and what you actually owe.⁷ Form 8960 handles the Net Investment Income Tax.⁹

Self-employed workers make quarterly estimated tax payments through the year, since no one is withholding for them. For 2026, the due dates are April 15, June 15, and September 15, 2026, plus January 15, 2027. You can skip the January installment by filing your return and paying the balance by February 1, 2027.¹⁷ The annual self-employment tax calculation goes on Schedule SE with Form 1040.¹³ Missing or underpaying estimated installments triggers a penalty calculated at the IRS underpayment interest rate on each shortfall, so freelancers and business owners generally aim to pay in at least 90% of the current year’s liability or 100% of the prior year’s.¹⁸

1
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
2
Office of the Law Revision Counsel. 26 U.S.C. 3101 – Rate of Tax
3
Office of the Law Revision Counsel. 26 U.S.C. 3111 – Rate of Tax
4
Social Security Administration. Contribution and Benefit Base
5
eCFR. 26 CFR 31.3102-4 – Special Rules Regarding Additional Medicare Tax
6
Internal Revenue Service. Topic No. 560, Additional Medicare Tax
7
Internal Revenue Service. Instructions for Form 8959
8
Office of the Law Revision Counsel. 26 U.S.C. 1411 – Imposition of Tax
9
Internal Revenue Service. Instructions for Form 8960
10
Office of the Law Revision Counsel. 26 U.S.C. 1401 – Rate of Tax
11
Internal Revenue Service. Topic No. 554, Self-Employment Tax
12
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
13
Internal Revenue Service. About Schedule SE (Form 1040), Self-Employment Tax
14
Internal Revenue Service. Student FICA Exception
15
Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
16
Internal Revenue Service. About Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits
17
Internal Revenue Service. 2026 Form 1040-ES
18
Office of the Law Revision Counsel. 26 U.S.C. 6654 – Failure by Individual to Pay Estimated Income Tax