How Medicare tax works
Medicare tax is the hospital insurance half of FICA. Your employer withholds 1.45% of your wages, pays another 1.45% itself, and reports the Medicare wages and tax in boxes 5 and 6 of your W-2. If you work for yourself you pay both halves, 2.9%, as part of self-employment tax, on 92.35% of your net profit.
The base is broad. There is no wage ceiling, so the tax on a $2 million salary is 1.45% of the full $2 million. It applies to traditional and Roth 401(k) deferrals, bonuses and vested stock pay, and it has no age limit: a 72-year-old who is enrolled in Medicare and still working pays it on every paycheck. What it never touches is income that isn’t pay for work, such as pensions, retirement account withdrawals, Social Security benefits, interest, dividends and capital gains.
The money goes to Medicare’s Hospital Insurance Trust Fund, which pays for Part A: inpatient hospital stays, skilled nursing facility care, home health care and hospice. Part B and Part D are paid for by enrollees’ premiums, money authorized by Congress and interest, not by the payroll tax. So years of Medicare tax don’t reduce the Part B premium you will pay after 65.
The 0.9% Additional Medicare Tax
Since 2013 a second layer has applied to high earners. The Additional Medicare Tax adds 0.9% to wages, railroad retirement compensation and self-employment income above a threshold set by filing status. The thresholds are written into the law as fixed dollar amounts and are not adjusted for inflation, so each year they catch a few more people. The employer pays no share of it, which makes the top employee Medicare rate 2.35%.
You report and settle it on Form 8959 with your return. Self-employment income is tested after wages: the threshold is reduced by your wages first, and a self-employment loss doesn’t count against it. For the self-employed, the half of self-employment tax that is deductible leaves out this 0.9%, so none of it is deductible.
- Single, head of household or qualifying surviving spouse: $200,000.
- Married filing jointly: $250,000 of the couple’s combined wages and self-employment income.
- Married filing separately: $125,000.
- Railroad retirement (RRTA) compensation is compared to the threshold on its own, not added to wages.
Withholding vs. what you owe
Employers must withhold the 0.9% once they pay you more than $200,000 in a calendar year, whatever your filing status, and they can’t stop because you ask. They withhold nothing below $200,000, even when your household will owe it. Two gaps follow.
A two-earner couple can owe tax nobody withheld. If each spouse earns $150,000, neither paycheck crosses $200,000, but their $300,000 combined is $50,000 over the joint threshold. The same thing happens to a single person with two jobs, or with a salary plus freelance income. The worked example below shows the bill.
The reverse happens too. A worker earning $230,000 whose spouse has no earnings has 0.9% withheld on $30,000, or $270, yet as a couple filing jointly they are under $250,000 and owe none of it. The $270 is credited back on the return.
To avoid a surprise at filing time, you can ask for extra withholding on Form W-4 or make estimated tax payments during the year.
Illustrative numbers
Two earners at $150,000 each, married filing jointly, 2026
- wages
- Medicare wages from all employers (and a spouse’s, on a joint return)
- self-employment income
- 92.35% of net self-employment profit, never below zero
- threshold
- $200,000 single or head of household, $250,000 joint, $125,000 separate
The regular 1.45% (2.9% for the self-employed) applies to every dollar below and above the threshold.
Spouse A wages$150,000
Spouse B wages$150,000
Regular Medicare tax withheld (1.45% × $300,000)$4,350
Additional Medicare Tax withheld by either employer$0
Combined wages over the $250,000 joint threshold$50,000
Additional Medicare Tax due with the return (0.9%)$450
Neither paycheck crossed $200,000, so no employer withheld the surtax, yet the couple owes $450 on Form 8959. Raising withholding on either spouse’s W-4 during the year covers it instead of leaving a balance due.
At a glance
Medicare tax and related charges compared (2026)
| Charge | Rate or amount | Applies to | Who pays |
|---|---|---|---|
| Medicare tax on wages | 1.45% + 1.45% | All wages, no cap | Employee and employer |
| Medicare part of self-employment tax | 2.9% | 92.35% of net profit, no cap | Self-employed person |
| Additional Medicare Tax | 0.9% | Wages and self-employment income over $200,000 / $250,000 joint / $125,000 separate | Employee or self-employed only |
| Net investment income tax | 3.8% | Investment income above the same thresholds | Individuals over the threshold |
| Part B premium (not a tax) | $202.90 a month standard | Medicare enrollees | Enrollee, plus IRMAA at higher incomes |
Put it in your plan
Medicare tax in MoneyWhatIf
On the Taxes page, MoneyWhatIf’s payroll worksheet prices Medicare at 1.45% of wages with no ceiling and Additional Medicare at 0.9% over the filing threshold, on lines of their own beside Social Security. Those thresholds stay fixed rather than rising with inflation, as the law writes them. The projection treats the surtax as an annual liability, so it doesn’t show employer withholding that differs from what the household finally owes. Part B and D premiums from 65, and IRMAA surcharges on higher incomes, are modeled separately.
Common questions
Medicare tax FAQs
Do you pay Medicare tax after 65?
Yes, if you are still working. Medicare tax is owed on wages at any age, even after you enroll in Medicare or start Social Security. What stops it is retirement itself: pensions, annuities, IRA and 401(k) withdrawals and Social Security benefits are not wages, so a fully retired person pays no Medicare tax.
Is there a maximum Medicare tax?
No. Social Security tax stops at the $184,500 wage base in 2026, but Medicare tax applies to every dollar of wages and self-employment earnings. Above $200,000 ($250,000 joint) the employee rate rises to 2.35%, so the dollar amount of Medicare tax keeps growing with income.
Why was Additional Medicare Tax withheld if our joint income is under $250,000?
Your employer must withhold 0.9% on wages it pays you above $200,000, without knowing your filing status or your spouse’s income. If your household’s combined wages and self-employment income end up under the $250,000 joint threshold, you owe none of it, and the amount withheld is credited back when you file Form 8959 with your return.
Do 401(k) and HSA contributions reduce Medicare tax?
A 401(k) deferral doesn’t: it is still Medicare wages, even though it lowers income tax. HSA contributions made through your employer’s cafeteria plan, and your share of health premiums paid the same way, are generally exempt from Medicare and Social Security tax. HSA contributions you make on your own are deducted from income tax only.
Why do I pay Medicare tax if I’m not on Medicare yet?
Because the tax isn’t a premium set aside for you. It goes into Medicare’s Hospital Insurance Trust Fund, which pays Part A benefits for the people enrolled now. What your working years earn is eligibility: 40 quarters of Medicare-covered work, your own or a spouse’s, make Part A premium-free when you enroll. With fewer quarters you can still get Part A, but you pay a monthly premium for it.