What Is the MED Tax Deduction on My Paycheck?

The “MED” deduction on your paycheck refers to the Medicare tax, a mandatory federal payroll tax. This deduction plays a role in funding the Medicare program, which provides health insurance benefits.

Understanding Medicare Tax

Medicare tax is a component of the Federal Insurance Contributions Act (FICA), which also includes Social Security tax. FICA taxes are federal payroll taxes that both employees and employers must pay to fund Social Security and Medicare benefits. This tax is levied on earned income, encompassing salaries, wages, bonuses, tips, and other taxable compensation.

The structure of Medicare tax involves a dual contribution: employees pay a share, and employers contribute a matching share. The standard employee Medicare tax rate for 2025 is 1.45% of gross wages, with the employer also contributing an equivalent 1.45%. This combined 2.9% supports the Medicare program. Unlike Social Security tax, there is no wage base limit for Medicare tax, meaning all covered wages are subject to this tax regardless of the amount earned.

An Additional Medicare Tax was introduced to apply to higher-income earners. This extra tax, at a rate of 0.9%, applies to earnings exceeding specific thresholds. Employers are responsible for withholding this additional tax once an employee’s compensation surpasses the $200,000 threshold, irrespective of the employee’s filing status.

Calculating Medicare Tax

Calculating the standard Medicare tax involves applying the fixed percentage rate to an individual’s gross wages. Since there is no income cap for Medicare tax, the 1.45% employee portion is applied to every dollar of taxable compensation earned. If an employee earns $2,000 in a pay period, the Medicare tax deduction would be $29 ($2,000 multiplied by 1.45%).

The Additional Medicare Tax is calculated on income exceeding certain thresholds, which vary based on tax filing status. For single filers, the additional 0.9% tax applies to income over $200,000. Married individuals filing jointly face this additional tax on income above $250,000, while married individuals filing separately have a threshold of $125,000. This additional tax is only applied to the amount of income that surpasses these specified thresholds.

For example, a single filer earning $220,000 in a year would pay the standard 1.45% Medicare tax on the entire $220,000. Additionally, the 0.9% Additional Medicare Tax would be applied to the $20,000 that exceeds the $200,000 threshold ($220,000 – $200,000). This results in an additional $180 ($20,000 multiplied by 0.9%) in Medicare tax for the year. For a married couple filing jointly with a combined income of $300,000, the Additional Medicare Tax would apply to the $50,000 exceeding their $250,000 threshold.

Impact on Your Paycheck

The “MED” line item on your paycheck signifies the Medicare tax deduction. This deduction is a mandatory withholding that contributes to the federal government’s Medicare trust fund. Employers are legally obligated to withhold this tax from employee paychecks and remit it to the government.

Information regarding your Medicare tax contributions is reported on your annual Wage and Tax Statement, Form W-2. Box 5 of Form W-2 shows your total Medicare wages and tips, which represents all earnings subject to Medicare tax. Box 6 indicates the actual amount of Medicare tax withheld from your pay during the year.

These mandatory contributions fund the Medicare program. Medicare primarily provides health insurance coverage for individuals generally aged 65 or older. It also extends coverage to certain younger individuals with disabilities and those with End-Stage Renal Disease.