Medicare tax is the payroll deduction that funds the federal Medicare program, formally called Hospital Insurance (HI). For 2025, the employee rate is 1.45% on all covered wages with no annual cap. Employers match that 1.45% separately. Unlike Social Security tax, Medicare withholding never stops regardless of income level. High earners also pay an Additional Medicare Tax of 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly). That surtax is employee-only and reconciled on Form 8959 at filing.
- For 2025, Medicare tax is 1.45% on all covered wages. There is no wage base cap. Medicare withholding continues for the entire calendar year regardless of total earnings.
- Employers match the 1.45% employee rate. The combined Medicare rate paid between employer and employee is 2.9% on every dollar of wages with no ceiling.
- High earners pay an Additional Medicare Tax of 0.9% on wages above $200,000 (single/HOH) or $250,000 (MFJ). This surtax is employee-only. Employers do not match it.
- Employers are required to begin withholding the 0.9% surtax once wages from that employer exceed $200,000 in the calendar year, regardless of the employee's filing status.
- Dual-income married couples often underpay the surtax during the year because neither spouse's individual wages trigger employer withholding. The shortfall is owed at filing.
- Self-employed workers pay the full 2.9% combined rate under SECA. Half of total SE tax is deductible. The Additional Medicare Tax at 0.9% is not deductible.
What Is Medicare Tax?
Medicare tax is the payroll deduction that funds the Medicare program. Medicare's formal name under the Social Security Act is Hospital Insurance, abbreviated HI. It funds hospital coverage (Part A) for eligible beneficiaries age 65 and older and for certain younger disabled individuals.
Medicare was created by the Social Security Amendments of 1965. Payroll contributions began in 1966. The original combined rate was 0.7% on wages up to $6,600. Both the rate and the coverage structure have changed significantly since then. For 2025, the combined rate is 2.9%, split equally between employee and employer, applied on all covered wages with no limit.
Medicare tax is one component of FICA. FICA stands for the Federal Insurance Contributions Act and covers two taxes: Social Security (6.2%) and Medicare (1.45%). Together, the employee FICA rate is 7.65%. Medicare is the smaller FICA component by rate but the one with no annual wage base ceiling. For the full FICA picture, see the FICA tax guide.
How Is Medicare Tax Calculated?
The calculation is direct. Multiply gross wages by 1.45% for each pay period. Unlike Social Security, there is no stopping point. Every dollar of covered wages is subject to the 1.45% rate through the last paycheck of the year.
| Element | 2025 Value | Notes |
|---|---|---|
| Employee rate | 1.45% | Applied to each paycheck's gross wages, no cap |
| Employer match rate | 1.45% | Paid separately by employer; not deducted from wages |
| Combined rate (employee + employer) | 2.9% | No wage base limit; applies on all covered wages |
| Additional Medicare Tax rate | 0.9% | Employee only; no employer match; applies above thresholds |
| Employer withholding trigger | $200,000 | Per employer, per calendar year, regardless of filing status |
| AMT threshold — Single / HOH | $200,000 | Based on individual wages + SE income combined |
| AMT threshold — MFJ | $250,000 | Based on combined household income |
| AMT threshold — MFS | $125,000 | Lower threshold applies to married filing separately |
What Wages Are Subject to Medicare Tax?
Medicare tax applies to most wages paid to W-2 employees: hourly wages, salaries, bonuses, commissions, vacation pay, sick pay paid by the employer, and tips reported by the employee. Unlike Social Security, Medicare applies on all of these wages with no annual limit. A high-earning employee who reaches the Social Security wage base mid-year will still have Medicare withheld from every remaining paycheck.
Pre-tax deductions such as 401(k) contributions and health insurance premiums reduce federal income tax withholding. They do not reduce FICA wages. A $1,000 biweekly 401(k) contribution reduces federal withholding. It has no effect on the $14.50 in Medicare tax on that $1,000.
Enter your hourly rate or annual salary to see a complete 2025 paycheck breakdown including Medicare, Social Security, and federal income tax withholding amounts.
What Is the Additional Medicare Tax?
The Additional Medicare Tax is an extra 0.9% surtax on wages above a threshold. It was added by the Affordable Care Act and applies beginning in tax year 2013. For 2025, the thresholds are:
- Single or Head of Household: $200,000
- Married Filing Jointly: $250,000
- Married Filing Separately: $125,000
The surtax applies to wages, railroad retirement tax act (RRTA) compensation, and net self-employment income above the applicable threshold. It is employee-only. Employers do not pay a matching share of the 0.9%.
The Additional Medicare Tax is reported and reconciled on Form 8959, filed with Form 1040 each year. The form calculates the total surtax owed based on all income sources and filing status, then compares it to what was withheld during the year. Any difference is either additional tax owed or a credit applied to the return.
Why the Net Investment Income Tax Is Different
High earners may also owe the Net Investment Income Tax (NIIT) at 3.8% on certain investment income. The NIIT applies to net investment income such as capital gains, dividends, interest, rents, and passive income above the same dollar thresholds used for the Additional Medicare Tax. The NIIT is not a payroll tax. It is not withheld from wages. It is computed separately on Form 8960 and reported on Form 1040. The NIIT and the Additional Medicare Tax are two separate levies that happen to use similar income thresholds.
How Does Employer Withholding of the Additional Medicare Tax Work?
Employers are required to withhold the 0.9% Additional Medicare Tax once an employee's wages from that employer exceed $200,000 in the calendar year. This is a per-employer rule. The employer does not know the employee's household filing status or wages from other sources.
The $200,000 employer withholding trigger does not depend on filing status. An employer applies the 0.9% once that single employee's wages pass $200,000, even if the employee is married filing jointly and the actual AMT threshold for their household is $250,000.
This creates two common mismatches at filing:
- Over-withholding: A single employee earning $210,000 has 0.9% withheld on $10,000. But if the employee's total combined income from all sources is still only $210,000 and filing status is single, the actual threshold is $200,000 and withholding is correct. If the employee is MFJ and combined household income is $210,000 (below the $250,000 MFJ threshold), the employer-withheld 0.9% results in a credit on Form 8959.
- Under-withholding: Two spouses each earn $150,000. Neither employer withholds the 0.9% because neither individual exceeds $200,000. But combined MFJ income is $300,000. That exceeds the $250,000 MFJ threshold by $50,000. The couple owes $450 in Additional Medicare Tax at filing on Form 8959. This amount is not withheld during the year and must be paid when the return is filed, or covered by estimated tax payments.
Real-World Examples: Medicare Tax at Different Income Levels
These examples use 2025 IRS rates. All figures use biweekly pay frequency.
Angela, $85,000/year, single, biweekly pay
Gross pay per period: $85,000 / 26 = $3,269.23
- Medicare withheld per period: $3,269.23 × 1.45% = $47.40
- Annual Medicare withheld: $85,000 × 1.45% = $1,232.50
- Employer match (annual): $1,232.50
Angela's wages are below the $200,000 threshold. No Additional Medicare Tax applies. Medicare is withheld at 1.45% on every paycheck for all 26 pay periods. Unlike Social Security, her Medicare withholding does not increase or decrease based on year-to-date totals.
David, $260,000/year, single, biweekly pay
Gross pay per period: $260,000 / 26 = $10,000.00
David reaches the $200,000 employer trigger at period 20. His employer begins withholding the Additional Medicare Tax starting with period 21.
- Regular Medicare (all 26 periods): $260,000 × 1.45% = $3,770.00
- Additional Medicare Tax on wages above $200,000: $60,000 × 0.9% = $540.00
- Total Medicare withheld: $4,310.00
- Effective Medicare rate on total wages: 4,310 / 260,000 = 1.66%
Starting with period 21, David's per-period Medicare withholding increases from $145.00 to $235.00. The $90 increase per period reflects the additional 0.9% on each $10,000 paycheck. His employer correctly applies both rates. No Form 8959 adjustments are needed assuming David's only income source is this employer.
Rachel and James, both W-2 employees, filing MFJ
Rachel earns $160,000/year. James earns $130,000/year. Combined: $290,000.
- Neither employer withholds the 0.9% surtax (neither individual exceeds $200,000)
- MFJ threshold: $250,000
- Combined wages above threshold: $290,000 - $250,000 = $40,000
- Additional Medicare Tax owed: $40,000 × 0.9% = $360.00
Rachel and James owe $360 on Form 8959 at filing. No employer withheld this amount because neither wage level crossed the $200,000 per-employer trigger. They can avoid a balance due by making a Q4 estimated tax payment or adjusting withholding via Form W-4.
Medicare Tax for Self-Employed Workers
Self-employed workers do not have an employer to match their Medicare contributions. They pay self-employment tax under SECA, the Self-Employment Contributions Act. The SE tax Medicare rate is 2.9% on all net self-employment earnings with no cap. This 2.9% covers both the employee and employer halves.
How Self-Employment Medicare Tax Is Calculated
Net self-employment earnings are multiplied by 92.35% before applying the 2.9% rate. The 92.35% adjustment reflects the employer-equivalent deduction: it prevents SE tax from applying to the portion of earnings that would represent the employer share in a W-2 relationship.
For example: $80,000 in net SE earnings × 92.35% = $73,880 taxable SE base. Medicare portion of SE tax: $73,880 × 2.9% = $2,142.52.
The Additional Medicare Tax for Self-Employed Workers
The Additional Medicare Tax at 0.9% also applies to net SE earnings above the applicable threshold: $200,000 for single filers, $250,000 for MFJ. The 0.9% applies to the actual net SE earnings above the threshold, not the 92.35%-adjusted figure. No employer withholding occurs for SE income. The full surtax is owed at filing on Form 8959.
The 0.9% Additional Medicare Tax is not deductible. Only half of the base SE tax (the combined 15.3% on income up to the Social Security wage base, plus the 2.9% Medicare portion above it) is deductible as an above-the-line deduction on Form 1040, Schedule 1.
Combining W-2 Wages and SE Income
If you have both W-2 wages and self-employment income, the Additional Medicare Tax thresholds apply to the combined total. W-2 wages are counted first against the threshold. For example: $180,000 in W-2 wages plus $50,000 in net SE earnings = $230,000 total. For a single filer, the Additional Medicare Tax applies to $30,000 above the $200,000 threshold. The W-2 employer withholds the surtax on wages above $200,000 (i.e., on $0 in this example if wages are $180,000). The 0.9% on the remaining $30,000 of combined excess is owed at filing.
To estimate take-home pay from self-employment income, use the 1099 tax calculator, which accounts for SE tax at the combined 15.3% and 2.9% rates.
How Medicare Tax Connects to Your Paycheck Calculators
Understanding the Medicare rate is useful context. Seeing the actual per-period dollar impact on your wages and pay frequency is more practical.
The hourly paycheck calculator applies the 2025 Medicare rate to your hourly wage and weekly hours. It shows Medicare withholding per pay period alongside Social Security and federal income tax withholding in a complete net pay breakdown.
The salary paycheck calculator handles annual salaried workers across all standard pay frequencies. Enter your salary and filing status. The calculator shows Medicare and Social Security withholding per period alongside estimated net pay.
For employer-side Medicare costs including the 1.45% employer match and FICA contributions, the payroll tax calculator shows the total employment cost per employee, including both employee and employer FICA obligations.
For the broader FICA framework covering both Social Security and Medicare together, see the FICA tax guide. For the Social Security side of FICA, see the Social Security tax explained guide.
At LMN Tax Inc, the Additional Medicare Tax is one of the most common year-end surprises we see for dual-income couples. Neither employer withholds the 0.9% because neither spouse's individual wages cross $200,000. The couple finds out at filing they owe a few hundred dollars. The fix is straightforward: request additional withholding on one spouse's W-4 using Step 4(c), or make a Q4 estimated payment. We also see confusion when a client changes jobs mid-year at a high salary. The new employer starts the Social Security wage base count from zero, but restarts Medicare at 1.45% continuously. The 0.9% surtax trigger at the new employer also resets. If the client's prior employer had already passed $200,000, the new employer starts over. Clients see a reduced Medicare line and assume something changed. The rate is the same. The per-employer count reset.
When Medicare Tax Rules May Not Apply Normally
- Certain government employees: State and local government employees covered by a qualifying public pension system may be exempt from Medicare if their employment began before April 1, 1986. Employees hired after that date are subject to Medicare tax regardless of pension coverage. Unlike Social Security, the Medicare exemption window for government workers closed earlier and covers fewer employees.
- Student FICA exception: Students employed by their college or university may qualify for a FICA exemption if the work is incident to their course of study. The exemption covers both Social Security and Medicare for qualifying student employees at qualifying institutions. Part-time student workers at eligible schools may see no Medicare withholding. Full-time employees who happen to be enrolled generally do not qualify.
- Certain nonresident aliens: Nonresident aliens on F-1, J-1, M-1, and Q-1 visas are exempt from FICA, including Medicare, during the period the exemption applies under IRC section 3121(b)(19). The employer must verify visa status and maintain documentation. This applies only while the individual qualifies as a nonresident alien for tax purposes.
- Railroad workers: Railroad employees are covered by a separate system under the Railroad Retirement Tax Act (RRTA) rather than FICA. They pay a separate Medicare equivalent tax under RRTA. The Additional Medicare Tax also applies to RRTA compensation above the thresholds. This is reported differently on W-2 forms and requires specific handling at filing.
- Dual-income MFJ couples: As noted in the examples, neither employer withholds the 0.9% surtax if neither spouse individually exceeds $200,000. The MFJ threshold is $250,000. Any household income above that amount is subject to the surtax at filing, regardless of what was withheld. This is a statutory feature, not an error.
Frequently Asked Questions About Medicare Tax
Now that you understand how Medicare tax is calculated, when the Additional Medicare Tax applies, and how employer withholding works, the next step is to see the actual dollar amounts for your wages and pay schedule.
Estimate take-home pay with the Hourly Paycheck Calculator or run the Paycheck Calculator for a full 2025 Medicare and net pay breakdown. For the employer-side Medicare cost including the 1.45% match, see the Payroll Tax Calculator. For the complete FICA picture including Social Security, see the FICA Tax Guide.