Why Do I Have to Pay a Medicare Tax?

The Medicare tax is a common payroll deduction, appearing on paychecks as “Medicare” or “Med.” This mandatory federal tax contributes to the nation’s healthcare system, specifically funding the Medicare program. It is a key part of the Federal Insurance Contributions Act (FICA) taxes, which also include Social Security taxes. Understanding this deduction is important for all taxpayers.

Understanding the Medicare Tax

The Medicare tax is a federal employment tax designed to fund the Medicare program, a government-run health insurance initiative primarily benefiting individuals aged 65 or older, and certain younger people with disabilities. This tax ensures the program’s financial stability. The funds collected are specifically allocated to the Medicare Hospital Insurance (HI) Trust Fund, also known as Medicare Part A. This portion of Medicare primarily covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home healthcare services.

Who Pays Medicare Tax

The responsibility for contributing to the Medicare tax is shared. Employees contribute directly through deductions from their earnings, and employers contribute a matching portion. Employers withhold the employee’s share from paychecks and remit these funds, along with their own contributions, to the Internal Revenue Service (IRS). Self-employed individuals bear the full responsibility for both the employee and employer portions of the Medicare tax, which they pay as part of their self-employment tax.

Medicare Tax Rates

The standard Medicare tax rate for most earnings in 2025 is 2.9% of all taxable wages. This rate is typically split evenly between the employee and the employer, with each contributing 1.45% of the employee’s gross wages. Unlike the Social Security tax, there is no income limit or wage cap on earnings subject to the Medicare tax, meaning all covered wages are taxed.

An “Additional Medicare Tax” applies to higher earners, as mandated by Internal Revenue Code Section 3101. This additional tax is an extra 0.9% on earnings above specific thresholds. For 2025, the threshold is $200,000 for individuals, $250,000 for married couples filing jointly, and $125,000 for married individuals filing separately. Employers are required to withhold this additional tax once an employee’s wages exceed $200,000 in a calendar year, but there is no employer matching contribution for this additional tax.

How Medicare Tax is Withheld

For employees, Medicare tax is automatically withheld from their paychecks by their employer. This deduction is typically itemized on their pay stub, often labeled as “Medicare” or “Med.” Employers are legally obligated to ensure these amounts are correctly withheld and remitted.

Self-employed individuals are responsible for paying their Medicare tax obligations themselves. This is done through estimated tax payments submitted quarterly to the IRS. These estimated payments encompass both income tax and self-employment taxes, which include the Medicare tax. The payment due dates for these quarterly estimates are generally April 15, June 15, September 15, and January 15 of the following year.