Is This W-2 for Medicare Qualified Government Wages?
Clarify your W-2: Understand how Medicare-qualified government wages are reported and identified for accurate tax purposes.
Understanding Medicare Qualified Government Wages on your W-2 is a common question for public sector employees. The W-2 form, or Wage and Tax Statement, records annual earnings and withheld taxes. Interpreting its sections, especially those for government employees, can be challenging. This article clarifies “Medicare qualified government wages” and guides you on locating and understanding this information on your W-2.
Understanding Medicare Tax for Government Employees
Medicare tax is a federal payroll tax that funds the Medicare program. For 2025, the employee Medicare tax rate is 1.45% of all covered earnings. Employers also contribute an equivalent 1.45%, making the total employer-employee contribution 2.9%. This tax applies to all wages, as there is no wage limit for Medicare tax. An additional Medicare Tax of 0.9% applies to wages exceeding $200,000 for individual filers, or $250,000 for married couples filing jointly.
Most federal employees hired after December 31, 1982, are subject to Medicare tax. While federal civilian employees were largely excluded from Social Security coverage before 1983, legislation in 1982 mandated they begin paying Medicare tax starting January 1, 1983.
Medicare tax application for state and local government employees is more nuanced. Many may or may not be subject to Medicare tax, depending on whether their employer has a Section 218 Agreement with the Social Security Administration (SSA). These voluntary agreements allow states to provide Social Security and Medicare coverage to public employees. If an employer has such an agreement, wages are subject to Medicare tax. “Medicare qualified government wages” refers to the earnings on which this tax is paid.
Locating Medicare Wages on Your W-2
To find Medicare wage information, focus on Box 5 and Box 6 of your W-2 form. Box 5, labeled “Medicare wages and tips,” reports all wages subject to Medicare tax, including salaries, bonuses, and tips. This amount can be higher than the wages reported in Box 1 for federal income tax purposes, especially due to certain pre-tax deductions excluded from income tax but not Medicare tax.
Box 6, “Medicare tax withheld,” indicates the total amount of Medicare tax deducted from your pay. This amount should be 1.45% of the wages reported in Box 5. If your Medicare wages in Box 5 exceed $200,000, Box 6 will also include the additional 0.9% Medicare tax withholding on the amount above this threshold.
It is helpful to compare Box 5 with Box 3 (“Social Security wages”). For most employees, these amounts will be identical. If Box 5 is blank or shows a minimal amount for a government employee, it indicates their wages are not subject to Medicare tax. This situation is common for state or local government employees whose employers do not have a Section 218 Agreement, or for federal employees hired before 1983.
Specific Scenarios for Government Medicare Wages
Federal employees hired before January 1, 1983, generally do not have Medicare wages in Box 5. They do not pay Medicare tax unless they elected coverage or were rehired after a break in service following the mandatory coverage date. Their Medicare Part A eligibility is often based on prior work history or a spouse’s Medicare-covered employment.
While state and local government employees’ Medicare coverage depends on their employer’s Section 218 Agreement, all state and local government employees hired after March 31, 1986, are mandatorily covered for Medicare, even if their employer does not have a Section 218 Agreement for Social Security coverage.
Individuals who have worked for both Medicare-covered and non-covered government entities might receive multiple W-2s, or their single W-2 might only reflect the wages subject to Medicare tax. When previously non-covered federal employees are rehired after a break in service, their wages may become subject to Medicare tax, regardless of their initial hire date. This rehire can change their tax status, making them subject to Medicare withholding.
Certain part-time, temporary, or seasonal government employees are subject to mandatory Medicare coverage. This applies even if full-time employees in the same agency are not, particularly at the state and local levels, due to provisions for new hires after specific dates. Those in positions not covered by a public retirement system may fall under mandatory Medicare coverage.