What Is FICA HI Tax? Rates, High Earners, and Self-Employment

The FICA HI tax is the Medicare hospital insurance portion of your Federal Insurance Contributions Act payroll tax. It takes 1.45% out of every paycheck, and your employer pays a matching 1.45%, for a combined rate of 2.9% on all of your wages with no income cap.¹ High earners owe an extra 0.9% on top of that once their income passes a threshold set by filing status. The money funds Medicare Part A, which pays for hospital stays, skilled nursing care, hospice, and some home health services.²

What Comes Out of Your Paycheck

The standard rate is simple: 1.45% withheld from you, 1.45% paid by your employer, applied to every dollar of covered wages. There is no ceiling. Social Security tax stops once your wages for the year reach $184,500 in 2026, but Medicare tax keeps running whether you earn $30,000 or $3 million.³

The tax applies to all cash compensation: salary, hourly wages, bonuses, commissions, and most fringe benefits. Your total Medicare wages and the amount withheld show up on your Form W-2 at year end.⁴

Why Your 401(k) Doesn’t Lower It

A common misconception is that putting money into a 401(k) shrinks your Medicare tax. It doesn’t. Pre-tax salary deferrals into a traditional 401(k) still get hit with both Social Security and Medicare taxes, even though they reduce your federal income tax.⁵ Same with Roth 401(k) contributions.

The one meaningful exception is a Health Savings Account funded through an employer’s Section 125 cafeteria plan. Those dollars are exempt from FICA entirely.⁶ HSA contributions you make on your own, outside the cafeteria plan, still owe Medicare tax.

The Extra 0.9% for High Earners

On top of the standard 2.9%, workers with high earned income owe an Additional Medicare Tax of 0.9%. This brings the effective Medicare rate to 3.8% on wages above the threshold. The surtax falls entirely on you; employers do not match it.⁷

The threshold depends on how you file:

Married filing jointly: $250,000 in combined earned income
Single, head of household, or qualifying surviving spouse: $200,000
Married filing separately: $125,000

These thresholds measure total earned income, so W-2 wages and net self-employment earnings get added together before you compare against the cutoff.⁷

Why Your Withholding May Not Match What You Owe

Your employer has no way of knowing your filing status or what your spouse makes. So the IRS uses one flat rule: once a single employer has paid you more than $200,000 in a calendar year, that employer starts withholding the extra 0.9% from every paycheck for the rest of the year, regardless of marital status.³

That creates mismatches in both directions. A married couple filing jointly where each spouse earns $150,000 has combined income of $300,000, which is $50,000 over their $250,000 threshold, yet neither employer withholds the surtax because neither paycheck crossed $200,000. A married-filing-jointly taxpayer earning $210,000 at one job hits withholding at $200,000 even though their household threshold is $250,000.⁸

Settling Up on Form 8959

You reconcile the Additional Medicare Tax on Form 8959, attached to your Form 1040.⁹ Over-withheld? You get a credit against your overall tax bill. Under-withheld? You owe the difference.

If you expect a shortfall, consider making estimated tax payments or asking for extra income tax withholding through a revised Form W-4. You can’t earmark estimated payments for the Additional Medicare Tax specifically; the IRS applies them to your total liability.⁸ To avoid an underpayment penalty, your combined withholding and estimated payments need to cover at least 90% of your current-year tax or 100% of last year’s tax, whichever is less.¹⁰

If You Work for Yourself

When you’re self-employed, there’s no employer to split the bill. You pay the full 2.9% Medicare tax on your net self-employment earnings, calculated on Schedule SE.¹¹ The tax applies to 92.35% of your net business profit rather than the full amount, which mirrors the break employees get because they don’t pay FICA on the employer’s share.¹²

You can also deduct half of your total self-employment tax (both Social Security and Medicare portions) when figuring adjusted gross income. The deduction reduces your income tax but not the self-employment tax itself.¹¹

The 0.9% surtax applies to self-employment income too. Your net self-employment earnings combine with any W-2 wages, and the surtax starts on the portion that exceeds your filing-status threshold.⁷ If you earn $120,000 from an employer and $100,000 from freelance work and file as single, the first $200,000 is taxed at the standard rate and the remaining $20,000 picks up the extra 0.9%.

Who Doesn’t Pay FICA HI Tax

Almost everyone with earned income pays it, but a handful of narrow exceptions exist.

Members of recognized religious groups that have provided for their dependents since at least December 31, 1950, and that conscientiously oppose insurance benefits (including Social Security and Medicare) can apply for an exemption using Form 4029. Approval means permanently waiving all Social Security and Medicare benefits.¹³ Ministers and members of religious orders use Form 4361 and follow separate rules.

Foreign students on F-1, J-1, or M-1 visas who have been in the United States for fewer than five calendar years are generally exempt from Medicare tax on wages tied to their visa purpose, such as on-campus work. The exemption ends once the student becomes a resident alien for tax purposes.¹⁴

Any student enrolled at least half-time at a school, college, or university is exempt from FICA on wages earned from that same institution when the work is incidental to their studies. Citizenship doesn’t matter. Jobs with outside employers don’t qualify.¹⁴

Children under 18 working in a parent’s sole proprietorship (or a partnership where both partners are the child’s parents) are exempt from Social Security and Medicare taxes on those wages. For domestic work in a parent’s private home, the exemption runs until the child turns 21. Both exemptions disappear if the business is structured as a corporation or includes a non-parent partner.¹⁵

One Thing FICA HI Tax Is Not

The 0.9% Additional Medicare Tax is often confused with the Net Investment Income Tax because both use the same filing-status thresholds and both involve a 3.8% figure. They are separate taxes on different income. FICA HI and its surtax hit earned income: wages and self-employment earnings. The Net Investment Income Tax applies a separate 3.8% to investment income like interest, dividends, capital gains, rents, and royalties, and it is calculated on modified adjusted gross income rather than wages.¹⁶ If you have significant investment income on top of high wages, you could owe both in the same year.

1
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
2
Social Security Administration. Parts of Medicare
3
Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide
4
Internal Revenue Service. About Form W-2, Wage and Tax Statement
5
Internal Revenue Service. Are Retirement Plan Contributions Subject to Withholding for FICA, Medicare, or Federal Income Tax
6
Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
7
Internal Revenue Service. Topic No. 560, Additional Medicare Tax
8
Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
9
Internal Revenue Service. 2025 Instructions for Form 8959 – Additional Medicare Tax
10
Internal Revenue Service. Topic No. 306, Penalty for Underpayment of Estimated Tax
11
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
12
Social Security Administration. If You Are Self-Employed
13
Internal Revenue Service. Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits
14
Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
15
Internal Revenue Service. Family Employees
16
Internal Revenue Service. Topic No. 559, Net Investment Income Tax