Medicare Tax

How It Works

Medicare tax funds the Medicare health insurance program for Americans age 65 and older. Unlike Social Security tax, Medicare tax has no wage base cap — every dollar of wages is subject to the 1.45% tax. Employers pay a matching 1.45%, for a total of 2.9%. Since 2013, the Additional Medicare Tax adds 0.9% on wages exceeding $200,000 for single filers ($250,000 for married filing jointly). This additional tax is employee-only — employers don't match it. The combined rate on high-income wages is therefore 2.35% for the employee and 3.8% total including the employer share. Self-employed individuals pay both halves (2.9%) plus the additional 0.9% above the threshold. The Additional Medicare Tax applies to the combined total of wages, compensation, and self-employment income. It cannot be reduced by filing status adjustments after the fact — employers begin withholding when individual wages exceed $200,000, regardless of filing status. This means a married couple each earning $150,000 won't have Additional Medicare Tax withheld at work, but they also won't owe it since their individual wages don't exceed the threshold. However, married filing separately filers have a lower $125,000 threshold, which can trigger unexpected Additional Medicare Tax liability. Investment income above the AGI threshold may trigger the separate but related Net Investment Income Tax of 3.8%.