What Percent Is Medicare Tax? Rates, Surtaxes, and Exemptions

The Medicare tax rate is 1.45% on every dollar of your wages, matched by another 1.45% from your employer, for a combined 2.9%. If you’re self-employed, you pay the full 2.9% yourself. Earners above certain thresholds owe an additional 0.9% on the income above the line, and investment income at higher incomes can trigger a separate 3.8% surtax.

The 1.45% Withheld From Your Paycheck

Under the Federal Insurance Contributions Act, 1.45% comes out of each paycheck for Medicare.¹ Your employer pays a separate 1.45% from its own funds.² Combined, 2.9% of your compensation funds Medicare Part A, which covers hospital stays, skilled nursing care, and hospice.³

Unlike Social Security tax, which stops applying once your wages hit $184,500 in 2026, Medicare tax has no wage base limit.⁴ Whether you earn $30,000 or $3 million, every dollar is subject to the 1.45% withholding.⁵

If You’re Self-Employed, You Pay 2.9%

Freelancers, independent contractors, and sole proprietors pay both halves because there’s no employer picking up a share. The obligation sits under the Self-Employment Contributions Act rather than FICA, but the rate is identical.⁶

The tax doesn’t apply to your full net profit. You first multiply your net self-employment income by 92.35%, an adjustment that mirrors the tax break W-2 employees get from not owing tax on the employer’s FICA share.⁷ On $100,000 of net profit, the 2.9% Medicare portion applies to $92,350, not $100,000.

You can also deduct half of your total self-employment tax when calculating your adjusted gross income. That deduction reduces your income tax but does not reduce the self-employment tax itself.⁸ The calculation goes on Schedule SE, and most self-employed taxpayers make quarterly estimated payments to avoid a large bill at filing time.

The Extra 0.9% on Higher Earnings

Once your earnings cross a set threshold, an Additional Medicare Tax of 0.9% applies to the income above the line. It doesn’t touch anything below.¹ The thresholds depend on filing status:

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

These thresholds are not indexed for inflation, so more people cross them as wages rise over time.⁹ Only the employee pays the 0.9%; employers do not match it.¹⁰

Self-employed people owe the same 0.9% on self-employment income above the same thresholds. If you have both wages and self-employment income, your wages reduce the threshold before the surcharge applies to your self-employment earnings.⁶

Why Your Withholding May Not Match What You Owe

Your employer must begin withholding the extra 0.9% once your wages from that single job pass $200,000 in a calendar year, regardless of your actual filing status.¹¹ The employer has no visibility into your spouse’s income or how you file, so $200,000 is the only trigger.

If you’re married filing jointly and earn $180,000 while your spouse earns $120,000, neither employer withholds the extra 0.9%, even though your combined $300,000 sits above the $250,000 joint threshold. You’d owe the additional tax on $50,000 when you file. In the opposite case, married filing jointly with $220,000 in wages and a spouse earning nothing, your employer starts withholding at $200,000, but your actual threshold is $250,000, so you overpaid and can claim a refund. Either way, the reconciliation happens on Form 8959.¹¹

The 3.8% Investment Surtax

The Net Investment Income Tax isn’t a Medicare payroll tax, but it was enacted alongside the Additional Medicare Tax and funds the same programs, which is why the two get grouped together. The 3.8% NIIT applies to investment income — capital gains, dividends, taxable interest, rental income, and royalties — not to wages or self-employment earnings.⁹

It uses the same thresholds as the Additional Medicare Tax: $250,000 for joint filers, $125,000 for married filing separately, and $200,000 for everyone else.¹² You owe 3.8% on the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold. These amounts are also not adjusted for inflation. The NIIT is reported on Form 8960 and applies on top of any capital gains taxes you already owe.

Worked Examples

For a W-2 employee earning $75,000, the math is direct: $75,000 × 1.45% = $1,087.50 withheld, and the employer pays another $1,087.50. Total Medicare contribution for the year: $2,175.

For a single filer earning $300,000 in wages, the calculation runs in two layers. The first $200,000 is taxed at 1.45%, or $2,900. The remaining $100,000 is taxed at 2.35% (1.45% plus the 0.9% surcharge), adding $2,350. Employee-side withholding totals $5,250. The employer’s share stays at $4,350 (1.45% of $300,000), because the Additional Medicare Tax is employee-only.¹⁰

For a self-employed person with $150,000 in net profit, multiply by 92.35% to get $138,525.⁷ Apply 2.9%, and the Medicare portion comes to about $4,017. Half of the total self-employment tax is then deductible against income tax.

Wages That Aren’t Subject to Medicare Tax

Most earned income is subject to the tax, but two exceptions are worth knowing.

Contributions made through a Section 125 cafeteria plan — pretax deductions for health insurance, flexible spending accounts, and similar benefits — are generally excluded from Medicare tax.¹³ That’s part of why pretax benefits carry real value: they cut both income tax and payroll tax.

Students who work at the college or university where they’re enrolled at least half-time can qualify for the student FICA exception, which exempts their wages from both Social Security and Medicare tax. The work has to connect to their course of study, and the exception does not apply to career employees who receive benefits like retirement contributions or paid vacation.¹⁴

1
Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
2
Office of the Law Revision Counsel. 26 USC 3111 – Rate of Tax
3
Medicare. How Is Medicare Funded?
4
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
5
Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security
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Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
7
Internal Revenue Service. Topic No. 554, Self-Employment Tax
8
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
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Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
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Internal Revenue Service. 2026 Publication 926
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Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
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Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
13
Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
14
Internal Revenue Service. Student FICA Exception