Medicare taxes fund Medicare coverage, a federal program that gives millions of retired and disabled individuals access to medical treatment. Although figuring out how much Medicare tax you owe can seem complex, it’s quite simple.
Medicare Hospital Insurance Tax
Regardless of how much you earn, the government imposes a flat 1.45% Medicare tax on the first $200,000 of wages. In 2022, if you make more than $200,000 a year, any additional funds will be taxed with a 2.35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax). (source)
Medicare Tax for the Self-Employed
If you’re a self-employed person, it’s up to you to pay both halves of the Medicare tax—so the entire 2.9% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, or a $125,000 on a return of a married individual who is filing separately), plus 3.8% (2.90% regular Medicare tax, and an additional 0.9% Medicare tax) on all self-employment income that is more than $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers who are filing separately). (source)
The Net Investment Income Tax
Investment income was not always subject to Medicare tax, but the Affordable Care Act changed that as well. A Medicare contribution tax of 3.8% now also applies to “unearned income”—meaning interest or dividends from investments instead of wages for labor. This is called the Net Investment Income Tax (NIIT).
|Filing Status||Threshold Amount|
|Married filing jointly||$250,000|
|Married filing separately||$125,000|
|Head of household (with qualifying person)||$200,000|
|Qualifying widow(er) with dependent child||$250,000|
Regardless of your situation, it’s best to stay informed on the ins and outs of Medicare tax to avoid any unexpected fees down the line!