The employee Medicare tax is a flat 1.45% of your gross wages, withheld from every paycheck under the Federal Insurance Contributions Act. Your employer pays a matching 1.45% from its own funds, and higher earners owe an extra 0.9% on wages above certain thresholds. Unlike Social Security tax, there is no wage cap: the 1.45% comes out of every dollar you earn. Those contributions are what qualify you for premium-free Medicare hospital coverage once you reach 65.
How Much Comes Out of Your Paycheck
Your employer withholds 1.45% of your gross wages for Medicare every pay period. The rate is set by 26 U.S.C. § 3101 and applies to your entire paycheck.1Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax Bonuses, commissions, tips, and most fringe benefits all count as wages for this purpose.
Equity compensation is taxable too. Restricted stock units trigger Medicare tax when the shares vest and settle; nonqualified stock options trigger it when you exercise them. The taxable amount is treated the same as ordinary wages for withholding.
Your total Medicare withholding for the year appears in Box 6 of your W-2, which includes both the standard 1.45% and any Additional Medicare Tax your employer withheld.2Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
What Your Employer Pays on Top
Your employer pays another 1.45% of your wages into Medicare from its own funds. That matching requirement comes from 26 U.S.C. § 3111, which imposes the tax directly on employers for every worker.3Office of the Law Revision Counsel. 26 USC 3111 – Rate of Tax The employer share is never deducted from your pay. Combined, the standard Medicare contribution is 2.9% of your wages.
The employee portion your employer withholds is considered a trust fund tax, because the employer holds that money for the government until it’s remitted. If a business owner or officer collects Medicare withholding but doesn’t send it to the IRS, the agency can assess a Trust Fund Recovery Penalty equal to the full unpaid amount and pursue the responsible person’s personal assets to collect.4Internal Revenue Service. Employment Taxes and the Trust Fund Recovery Penalty (TFRP)
The Extra 0.9% for Higher Earners
Once your wages pass a certain level in a calendar year, you owe an Additional Medicare Tax of 0.9% on top of the standard 1.45%. The thresholds under 26 U.S.C. § 3101(b)(2) depend on your filing status:1Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
- Single or head of household: wages above $200,000
- Married filing jointly: combined wages above $250,000
- Married filing separately: wages above $125,0005Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
Your employer doesn’t know your filing status or your spouse’s income. It simply starts withholding the extra 0.9% once your wages from that job cross $200,000 for the year, no matter how you file. That creates a mismatch for some households. A married couple filing jointly whose combined wages top $250,000 but where neither spouse individually earns over $200,000 will owe the tax even though nothing extra was withheld. Someone filing separately who earns $180,000 will owe the surcharge on every dollar above $125,000 without any extra withholding either.
You reconcile the difference on Form 8959 when you file your return.6Internal Revenue Service. About Form 8959, Additional Medicare Tax If you expect to owe more than what your employer withholds, adjusting your W-4 or making estimated payments during the year prevents a surprise bill in April. The Additional Medicare Tax is entirely the employee’s responsibility. Employers do not match it.
If You Work for Yourself
Self-employed workers pay both halves of the Medicare tax: 2.9% of net earnings, with no cap.7Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Additional Medicare Tax of 0.9% applies to self-employment income above the same filing-status thresholds that apply to wages.
The tax code offsets the double hit partway. When you figure your adjusted gross income, you can deduct the employer-equivalent half of your self-employment tax, which reduces your income tax. The deduction does not reduce the self-employment tax itself.
Who Doesn’t Pay Medicare Tax
Nearly every W-2 employee pays Medicare tax. The exemptions are narrow:
- Students enrolled at least half-time who work for the same college or university they attend are generally exempt, unless they qualify as a “professional employee” eligible for benefits like a retirement plan, paid vacation, or sick leave.8Internal Revenue Service. Student FICA Exception
- Members of recognized religious sects that have continuously existed since 1950 and oppose all forms of insurance can apply for exemption using Form 4029, but approval requires permanently waiving all rights to Social Security and Medicare benefits.9Internal Revenue Service. Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits
- Employees of foreign governments and qualifying international organizations working in the United States are not subject to Medicare tax on that compensation.10Internal Revenue Service. Employees of a Foreign Government or International Organization (FICA) Including Social Security and Medicare Tax
If none of those categories fits you, there is no opt-out. Medicare tax is mandatory.
What Your Contributions Buy You
Paying Medicare tax through your working life is what earns you premium-free hospital coverage later. Eligibility runs on work credits, formally called quarters of coverage. You need 40 credits to qualify for premium-free Medicare Part A, which is roughly ten years of work.11Office of the Law Revision Counsel. 42 USC 414 – Insured Status for Purposes of Old-Age and Survivors Insurance Benefits
In 2026, you earn one credit for each $1,890 in wages, up to four credits per year. Earning at least $7,560 in a calendar year maxes out your credits.12Social Security Administration. Quarter of Coverage The dollar amount rises with inflation each year. Credits don’t expire, and gaps in employment don’t erase what you’ve already earned.
Part A covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health services. If you reach 65 without 40 credits, you can still enroll in Part A, but you’ll pay a monthly premium. In 2026, that premium is $311 if you have 30 to 39 credits and $565 if you have fewer than 30.13Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles A spouse’s work record can also qualify you: if your spouse has 40 credits, you’re generally eligible for premium-free Part A on their record once you both meet the age requirement.
Signing Up So You Don’t Lose What You Paid For
Your Initial Enrollment Period is a seven-month window that starts three months before the month you turn 65 and ends three months after that month.14Medicare.gov. When Does Medicare Coverage Start Missing that window can trigger late enrollment penalties and leave you uncovered for months.
If you’re still working and covered by an employer group health plan at 65, you can generally delay Part B without penalty and use an eight-month Special Enrollment Period after that coverage ends.15Medicare.gov. Working Past 65 Watch one trap: COBRA does not count as employer group coverage for this purpose. The Special Enrollment clock starts when your active job-based coverage ends, not when COBRA runs out. If you miss it, you wait for the next General Enrollment Period (January 1 through March 31), coverage doesn’t start until July, and the Part B late penalty of 10% for every full 12 months you could have enrolled but didn’t sticks to your premium for as long as you have Part B.16Medicare.gov. Avoid Late Enrollment Penalties
If you already qualify for premium-free Part A and you’re still working, there’s generally no cost to enrolling in Part A during your Initial Enrollment Period while keeping your employer plan. It can sit alongside your job-based coverage as a secondary payer.