What Is Med Tax (Medicare Tax) on My Paycheck?
Demystify the Medicare tax on your paycheck. Learn its purpose, how it's calculated, and where to find this essential deduction.
The Medicare tax, often seen on paychecks as “Med Tax,” is a mandatory federal payroll deduction. It serves a specific purpose: to fund the Medicare program, which provides health insurance coverage. This program primarily assists individuals aged 65 or older, along with certain younger people who have disabilities.
Understanding Medicare Tax
Medicare tax is one component of the Federal Insurance Contributions Act (FICA) tax, which also includes Social Security tax. Both employees and employers share the responsibility of contributing to Medicare. The employee’s portion is automatically withheld from their earnings, while the employer provides a matching contribution. This dual contribution system ensures broad funding for the program.
The Medicare program itself is a federal health insurance initiative. It encompasses various parts, such as Part A, which covers hospital insurance, and Part B, which addresses medical insurance. These taxes collectively support the healthcare needs of millions of Americans, providing a safety net for hospital stays, doctor visits, and other medical services.
How Medicare Tax is Calculated
The standard Medicare tax rate for employees is 1.45% of all earned income. This percentage is applied to every dollar of wages and self-employment income, without any upper limit on the amount subject to the tax. This contrasts with Social Security tax, which has an annual wage base limit beyond which earnings are no longer taxed.
An additional 0.9% Medicare Tax applies to earned income that exceeds certain thresholds. For single filers and those filing as Head of Household or Qualifying Widow(er), this additional tax applies to income above $200,000. Married individuals filing jointly face this additional tax on earned income exceeding $250,000, while married individuals filing separately have a threshold of $125,000. Employers are required to begin withholding this 0.9% additional tax once an employee’s wages surpass $200,000 in a calendar year, irrespective of the employee’s filing status. There is no corresponding employer contribution for this additional tax.
For example, a single individual earning $220,000 would pay 1.45% on the entire $220,000, plus an additional 0.9% on the $20,000 that exceeds the $200,000 threshold. This results in a combined Medicare tax rate of 2.35% on income above the threshold. Similarly, a married couple filing jointly with combined earnings of $280,000 would pay the standard 1.45% on their total income, and the additional 0.9% on the $30,000 that exceeds their $250,000 threshold. Self-employed individuals pay both the employee and employer portions of the Medicare tax, totaling 2.9% on all net earnings, plus the additional 0.9% if their income surpasses the applicable thresholds.
Where to Find Medicare Tax Information
You can typically locate Medicare tax information on your pay stub, where it is often labeled as “MEDICARE,” “MED,” “FICA MED,” “HI” (Hospital Insurance), or “MWT” (Medicare Withholding Tax). This section of your pay stub will show the amount withheld from your current pay period and your year-to-date contributions.
Annually, your Medicare tax contributions are summarized on your Form W-2, Wage and Tax Statement. Box 5 of the W-2 reports your Medicare wages and tips, which represents the total amount of your earnings subject to Medicare tax. Box 6 indicates the total Medicare tax withheld from your pay during the year. For most employees, the amount in Box 5 is usually the same as the wages reported in Box 1 for federal income tax purposes.
Self-employed individuals report their Medicare tax as part of their Self-Employment Tax on Schedule SE (Form 1040). This form calculates both the Social Security and Medicare tax components for those who work for themselves. Generally, Medicare tax withheld from your paycheck is not deductible for income tax purposes. However, self-employed individuals can deduct half of their self-employment taxes, which includes the Medicare portion, when calculating their adjusted gross income. Additionally, Medicare premiums, such as those for Part B, may be tax-deductible as medical expenses if you itemize deductions and meet specific adjusted gross income thresholds.