Who Is Exempt From Medicare Tax Payments?

Medicare tax is a federal payroll tax that helps fund Medicare, the national health insurance program for individuals aged 65 or older, and certain younger people with disabilities. This tax primarily supports Medicare Part A, which covers hospital insurance, hospice care, and some nursing facility services. While most earned income is subject to this tax, there are specific, limited circumstances where individuals or certain types of income are exempt. This article clarifies who falls into these exempt categories.

Exemptions for International Status

Individuals with specific international status or diplomatic agreements may be exempt from Medicare tax. This includes nonresident aliens on certain visa types and employees of foreign governments or international organizations.

Nonresident alien students, scholars, teachers, researchers, and others on F-1, J-1, M-1, or Q-1 visas are exempt from Medicare tax on U.S. wages. This exemption applies as long as they maintain nonresident alien status for tax purposes and their work aligns with their visa’s purpose. This typically includes the first five calendar years for students. However, this exemption does not extend to spouses and children on derivative visas.

Employees of foreign governments and international organizations, along with their immediate family members, are generally exempt from U.S. Social Security and Medicare taxes on their official compensation. This exemption is due to diplomatic immunity or established international agreements. For foreign government employees, this typically requires the foreign government to grant an equivalent tax exemption to U.S. government employees performing similar services in their country. These exemptions are specific to compensation received for official services rendered in their capacity as employees of these entities.

Exemptions for Specific Employment Relationships

Services performed by a child under the age of 18 for a parent who operates a sole proprietorship or a partnership where both partners are the child’s parents are exempt from Medicare tax. If the child performs domestic work in a parent’s private home, the exemption applies until the child reaches age 21. Wages paid to a spouse by another spouse are generally subject to Medicare tax.

Student employment can also be exempt from Medicare tax. Services performed by a student enrolled and attending classes at the school, college, or university where they are employed are exempt. This applies when the individual’s primary activity is being a student, and their employment is incidental to their course of study. This exemption typically does not extend to medical residents, interns, or fellows.

Domestic service wages are subject to Medicare tax unless they fall below a certain annual threshold. For 2025, if an employer pays a domestic worker less than $2,800 in cash wages during the calendar year, those wages are exempt from Medicare tax. Election workers are exempt if their annual wages are below $2,400 for 2025.

Exemptions for Religious and Governmental Status

Exemptions from Medicare tax can be granted based on religious beliefs or specific governmental employment circumstances. Members of certain recognized religious groups may be exempt if they are conscientiously opposed to accepting benefits from any private or public insurance that provides payments for death, disability, old age, retirement, or medical care. To qualify, the religious sect must have existed since December 31, 1950, and provide for its dependent members. Individuals seeking this exemption must apply using IRS Form 4029.

State and local government employees hired before April 1, 1986, may remain exempt from mandatory Medicare tax if their employment has been continuous with that employer and they are members of a public retirement system. This “continuing employment exception” applies if the employee was performing regular services for the employer before the specified date and the employment relationship was not established to avoid Medicare tax. Most state and local government employees hired after March 31, 1986, are mandatorily covered by Medicare.

Understanding the Implications of Exemption

An exemption from Medicare tax carries specific implications for future benefits and current tax responsibilities. When wages are exempt from Medicare tax, they generally do not count towards eligibility for Medicare benefits in retirement or due to disability. This means that while an individual may not pay the tax currently, the earnings from that exempt employment will not contribute to the required work credits for future Medicare coverage. Individuals might still qualify for Medicare through other avenues, such as a spouse’s work record or other periods of covered employment.

If an individual believes they are exempt from Medicare tax, they should verify their employer is not withholding these taxes. Employers are responsible for applying the appropriate tax rules based on the employee’s specific status and the nature of their employment. For those with self-employment income, earnings exceeding $400 are typically subject to self-employment tax, which includes Medicare tax. However, if a religious exemption (Form 4029) is approved, it generally applies to both wages and self-employment income.

For individuals with an approved religious exemption, this waiver is irrevocable for the period it is effective and means renouncing all rights to Social Security and Medicare benefits based on those earnings. Consulting with a tax professional is advisable for personalized guidance regarding exemption status and its long-term financial implications.