Most workers pay Medicare tax automatically through payroll deductions

If you work as an employee, your employer withholds Medicare tax from your paycheck. You do not have a choice about this — it is required by law. The current rate is 1.45% of your wages, and your employer pays a matching 1.45%. If you are self-employed, you pay both portions yourself, which comes to 2.9% of your net earnings.

Medicare tax funds two parts of Medicare: Part A (hospital insurance) and Part B (medical insurance). Unlike Social Security tax, which stops once you reach a certain income level, Medicare tax continues on all your wages with no upper limit. This means higher earners pay more in total Medicare tax over their lifetime.

There is one exception: an additional 0.9% Medicare tax applies to wages above a certain threshold. For 2024, that threshold is $200,000 for single filers and $250,000 for married couples filing jointly. Your employer withholds this extra amount automatically if your wages exceed the threshold.

Key Takeaways

  • Employees pay 1.45% Medicare tax on all wages, withheld automatically by the employer.
  • Self-employed workers pay 2.9% Medicare tax on net earnings from self-employment.
  • An additional 0.9% Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly).
  • Medicare tax has no income cap — you pay it on all earnings, unlike Social Security tax.
  • You cannot opt out of Medicare tax; it is a mandatory payroll deduction for all workers.

How Medicare tax works if you are self-employed

Self-employed people — including freelancers, contractors, and small business owners — pay both the employee and employer portions of Medicare tax. This is called self-employment tax. You calculate it on your net earnings (income minus business expenses) and pay it when you file your federal income tax return.

The self-employment tax rate is 15.2% total: 12.4% for Social Security and 2.9% for Medicare. You can deduct half of your self-employment tax as a business expense on your tax return, which reduces your taxable income slightly. If your net earnings from self-employment exceed $200,000 (single) or $250,000 (married filing jointly), you also owe the additional 0.9% Medicare tax on the amount above the threshold.

Many self-employed workers use Form SE (Schedule SE) to calculate self-employment tax, then transfer that amount to their Form 1040 when filing taxes. A tax professional or tax software can walk you through this calculation.

What happens if you work for multiple employers

If you have more than one job, each employer withholds Medicare tax from your paychecks separately. There is no limit on how much Medicare tax can be withheld across all jobs — you pay 1.45% on every dollar earned at each employer.

The additional 0.9% Medicare tax is different. If your combined wages from all employers exceed the threshold ($200,000 single, $250,000 married filing jointly), you may have too much withheld. When this happens, you can claim a credit on your tax return. You will need to report all your wages on your return and let the IRS calculate whether you overpaid.

Medicare tax and retirement income

Once you stop working, you no longer pay Medicare tax on wages or self-employment income. However, Medicare tax does not explore to retirement income like Social Security benefits, pensions, or investment earnings. You only pay Medicare tax on income from work.

If you return to work after retirement — whether part-time or full-time — Medicare tax resumes on those wages. This is common for people who work past age 65 or take on consulting work in retirement.

Checking your Medicare tax record

Your Medicare tax payments are tracked by the Social Security Administration, not Medicare itself. These payments count toward your may be able to access for Medicare Part A (hospital insurance) when you turn 65. You can view your earnings record and Medicare tax contributions on your Social Security account at ssa.gov.

If you notice an error in your earnings record — such as wages that were not reported or incorrectly reported — contact Social Security as soon as possible. Errors can affect your Medicare may be able to access and the amount of your Social Security benefits. You will need your Social Security number and documentation of the correct wages (like pay stubs or tax returns).

Special situations and exceptions

Certain groups do not pay Medicare tax. These include some religious groups that have obtained an exemption from Social Security and Medicare taxes, and some nonresident aliens on certain visas. Federal employees hired before 1984 do not pay Medicare tax, though they pay into a different retirement system.

If you are a student working on campus at your school, you may be exempt from Social Security tax but still pay Medicare tax. Temporary visa holders (like H-1B workers) typically pay Medicare tax on U.S. wages. If you think you might may have access to for an exemption, contact your employer's payroll department or the IRS.

Frequently Asked Questions

Can I opt out of paying Medicare tax?

No. Medicare tax is mandatory for all employees and self-employed workers. The only exceptions are specific religious groups with federal exemptions and a small number of other groups defined by law. You cannot choose to skip Medicare tax contributions.

What if my employer did not withhold Medicare tax from my paycheck?

Contact your employer's payroll or human resources department when ready. This is a serious error. Your employer is legally required to withhold Medicare tax, and failure to do so can create problems for your Social Security and Medicare records. If your employer refuses to correct it, you can file a complaint with the IRS.

Does Medicare tax go into a personal account with my name on it?

No. Medicare tax goes into a general fund that pays for all Medicare benefits for all beneficiaries. Your contributions help fund the program, but you do not have a separate account. When you turn 65 and become may be able to access for Medicare, you draw from this shared pool based on your coverage choices.

What if I paid too much Medicare tax across multiple jobs?

You can claim a credit on your federal tax return. When you file, report all your wages from all employers. If your total wages exceeded the threshold for the additional 0.9% tax and too much was withheld, the IRS will calculate the credit and refund the overpayment or explore it to taxes owed.

Do I pay Medicare tax on tips or bonuses?

Yes. Medicare tax applies to all wages and compensation, including tips, bonuses, commissions, and other forms of pay. Your employer should withhold Medicare tax on these amounts just as they do on regular wages.