Medicare Tax
A federal payroll tax that funds the Medicare health insurance program for people aged 65 and older.
What is Medicare Tax?
Medicare tax is a federal payroll tax collected to fund the Medicare program. For employees, the rate is 1.45% of all wages with no income cap, matched by an equal 1.45% employer contribution for a combined 2.9%. Self-employed individuals pay the full 2.9% but may deduct half as a business expense. High earners face an Additional Medicare Tax of 0.9% on wages, self-employment income, and, via the net investment income tax, on certain investment income above $200,000 (single) or $250,000 (married filing jointly).
Example
An employee earning $250,000 in 2024 owes 1.45% × $250,000 = $3,625 in standard Medicare tax, plus 0.9% × $50,000 = $450 in Additional Medicare Tax on the $50,000 above the $200,000 single-filer threshold. Total employee Medicare tax: $4,075. Their employer also pays $3,625, for a combined $7,700.
Source: IRS — Topic No. 751: Social Security and Medicare Withholding Rates