Medicare tax rate

The Medicare tax percentage that is paid by an employee is 1.45% (plus matching of the same amount by the employer), and 2.9% for self-employed workers. There is no cap on the income to which this tax applies. In addition, if a person earns more than a threshold level, an additional 0.9% Medicare tax applies. The threshold is as follows:

  • $250,000 for married taxpayers filing jointly
  • $125,000 for married taxpayers filing separately
  • $200,000 for single and all other taxpayers

Medicare is a health insurance program that is administered by the United States government, and which is primarily available to those 65 years old or older, as well as to those with certain disabilities. The program is funded through the Medicare tax, though participants must also pay a portion of all health insurance costs incurred. The program has been in existence since 1965, and is currently operational.

Medicare Tax Limits

There is no cap on the Medicare tax for employed and self-employed people; thus, everyone must pay it, irrespective of the amount of money that they earn.

Medicare Tax Examples

ABC International employs Mr. Smith, who earns $5,000 of gross pay in the most recent pay period. ABC withholds $72.50 ($5,000 x .0145) from the pay of Mr. Smith, matches the $72.50 from its own funds, and forwards $145.00 to the government.

Mr. Jones is self-employed, and earns a total of $150,000 during the year. His total Medicare contribution during the year is $4,350 ($150,000 x .029).