Tax Glossary
Key Tax TermMedicare Tax
Medicare tax is a payroll tax that funds health insurance for people age 65 and older, as well as certain younger individuals with disabilities. It is withheld from most paychecks and also paid by self-employed workers through the self-employment tax.
💡Simple definition
Medicare tax is a federal tax that helps pay for the Medicare program. Most employees pay 1.45% of their wages, and their employer matches the amount.
📊Standard Medicare tax rate
For most workers:
- •You pay: 1.45%
- •Your employer pays: 1.45%
Total Medicare tax = 2.9%
(Split evenly between employee and employer)
💼Additional Medicare Tax
High-income earners must pay an extra 0.9% Medicare tax on wages above certain income thresholds.
- ⚠️Only employees pay this extra tax — employers do NOT match it.
- ⚠️It applies once your income exceeds certain limits, which depend on your filing status.
👤If you're self-employed
Self-employed workers pay both the employee and employer portion of Medicare tax as part of the self-employment tax.
- •Total Medicare tax for self-employed: 2.9%
- •Additional Medicare Tax may apply over certain income levels
💡 Good news: You can deduct the "employer" half of self-employment taxes when calculating your AGI.
🏥What Medicare tax pays for
This tax helps fund:
- ✓Medicare Part A (Hospital Insurance)
- ✓Coverage for people 65 or older
- ✓Certain disabled individuals
- ✓End-stage renal disease coverage
🧮Quick example
You earn $60,000 in wages from your job.
Your Medicare tax:
1.45% × $60,000 = $870
💡 Your employer also pays $870 — matched automatically.
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