Medicare Tax Rate 2023
- In this review, we outline how much the Medicare tax rate is in 2023, how it’s calculated and whether you might be exempt from paying it. Learn more about the 2.9% Medicare tax rate and what it means for you.
Most people know that Medicare is funded through taxes, but many people may not know exactly how much the Medicare tax rate is.
How Much Is Taken Out of My Paycheck?
The Medicare tax rate in 2023 is 2.9%. That amount is split evenly between employers and employees, with each side paying 1.45% respectively. The Medicare tax rate has gradually increased over the years since debuting at 0.7% (0.35% for both employer and employee) in 1966.
What is “FICA” on my Paycheck?
Some may confuse Medicare taxes with Social Security taxes. Both types of taxes are lumped under the FICA tax (Federal Insurance Contributions Act) but remain separate from each other.
- The Medicare tax helps pay for the Medicare Hospital Insurance fund.
- The Social Security tax funds Old Age, Survivors and Disability Insurance, more commonly called Social Security benefits. The current Social Security tax rate is 12.4% with employers and employees each paying 6.2%.
When Do I Pay Medicare Taxes?
Medicare taxes are automatically deducted from your paycheck and apply to all earnings, bonuses, and tips. Medicare taxes are collected from all employees regardless of age, even those who are collecting Social Security benefits.
If you receive a paper check, you should also receive a pay stub that itemizes your deductions including your Medicare taxes. If your paycheck is directly deposited into your bank account, you should also receive a statement with your itemized deductions and withholdings.
Does Everyone Pay Medicare Tax?
If your income is reported for tax filing purposes, then you will typically pay the Medicare tax.
Some exceptions to the Medicare tax rate do exist and include:
- Non-resident alien students
- Other non-resident aliens who are temporarily in the United States on non-immigrant status
Anyone over the age of 65 who has no earned income does not pay Medicare taxes.
The self-employed are responsible for paying both the employee share as well as that of the employer.
Is There a Limit on Medicare Tax?
Unlike Social Security taxes, there is no limit on how much of your income is subject to Medicare taxes. The Medicare tax rate applies to all earned income and taxable wages, and there is no minimum income required to be subject to Medicare taxes.
In fact, higher earners pay an Additional Medicare Tax of 0.9% on all earned income above $125,000 (married and filing separately), $200,000 (single, head of household or qualifying widow or widower with dependent child) or $250,000 (married and filing jointly). So if you make $150,000 per year and are married and filing separately, you will pay the standard 1.45% on the first $125,000 of your income and 2.35% (1.45% plus 0.9%) on the remaining $25,000.
Only employees pay the additional 0.9%. The Additional Medicare Tax does not apply to employers.
Higher income earners will also pay an additional surtax for their Medicare Part B and Part D premiums.
How Is Medicare Tax Calculated?
The Medicare tax rate is determined by the IRS and is subject to change. To calculate the Medicare tax, multiply your earnings by 0.0145. So if your biweekly pay is $2,000, your Medicare tax will be $29 (2,000 x 0.0145 = 29).
In this example, both the employee and employer will owe $29 to Medicare for the pay period.
What if I Have Additional Medicare Tax Questions?
You may call 1-800-MEDICARE (1-800-633-4227) with any additional questions about Medicare.