Comprehensive Guide
Medicare Tax 2025-2026 — Rates, Additional Medicare Tax & NIIT
Complete guide to Medicare tax rates for 2025 and 2026. Learn about the base 2.9% rate, Additional Medicare Tax surcharge, Net Investment Income Tax (NIIT), self-employed rules, exemptions, and state-by-state rules.
What Is Medicare Tax?
Medicare tax is a payroll tax that funds the Hospital Insurance (HI) trust fund, which helps pay for Medicare Part A (hospital insurance) benefits. It is one of two components of FICA (Federal Insurance Contributions Act) tax, alongside Social Security tax. The Medicare tax rate is 2.9% total, split evenly between employee (1.45%) and employer (1.45%).
Unlike Social Security tax, Medicare tax has no wage base limit — all covered wages are subject to the full 2.9% rate, no matter how high your earnings. For high-income earners, the Affordable Care Act added two additional Medicare-related taxes: the Additional Medicare Tax (0.9% on wages above thresholds) and the Net Investment Income Tax (3.8% on investment income above thresholds).
Use our free tax refund calculator to see how Medicare taxes affect your overall tax situation.
Medicare tax is separate from Medicare premiums (Part B and Part D) that beneficiaries pay for healthcare coverage. The Medicare tax funds Part A (hospital insurance), which is generally premium-free for individuals who have paid Medicare taxes for at least 40 quarters (10 years).
2025 Medicare Tax Rates
The base Medicare tax rate remains unchanged for 2025 at 2.9% total. The table below shows how the tax is split between employees, employers, and self-employed individuals, along with the Additional Medicare Tax thresholds.
| Taxpayer Type | Base Medicare Tax | Additional Medicare Tax | Total Possible Rate | Threshold (Single) | Threshold (MFJ) |
|---|---|---|---|---|---|
| Employee | 1.45% | 0.9% | 2.35% | $200,000 | $250,000 |
| Employer | 1.45% | 0% (no match) | 1.45% | N/A | N/A |
| Self-Employed | 2.9% | 0.9% | 3.8% | $200,000 | $250,000 |
For 2025, the base Medicare tax rate remains the same as it has been since 1986 — 1.45% for employees and 1.45% for employers. The Additional Medicare Tax thresholds are not indexed for inflation, so they remain at the same levels set when the Affordable Care Act was enacted.
Unlike Social Security tax, which has a wage base limit of $176,100 for 2025, Medicare tax applies to every dollar of covered wages with no upper limit. This means a CEO earning $10 million pays Medicare tax on the full $10 million, while Social Security tax only applies to the first $176,100.
See how Medicare taxes affect your total tax bill with our free tax refund calculator. It accounts for all Medicare and payroll taxes.
Additional Medicare Tax 0.9%
The Additional Medicare Tax is a 0.9% surcharge on wages and self-employment income that exceed certain thresholds. It was enacted as part of the Affordable Care Act (ACA) and took effect in 2013. Unlike the base Medicare tax, only the employee pays the Additional Medicare Tax — there is no employer matching portion.
Thresholds for Additional Medicare Tax
| Filing Status | Threshold Amount |
|---|---|
| Single | $200,000 |
| Married Filing Jointly | $250,000 |
| Married Filing Separately | $125,000 |
| Head of Household | $200,000 |
| Qualifying Widow(er) | $250,000 |
These thresholds are not adjusted for inflation, meaning more taxpayers become subject to the Additional Medicare Tax each year as wages rise. This is known as "bracket creep" — a phenomenon the base Medicare tax avoids by having no upper limit and no threshold.
How Withholding Works
Employers are required to begin withholding the Additional Medicare Tax once an employee's wages exceed $200,000 in a calendar year, regardless of the employee's marital status or filing status. This means if you are married filing jointly with combined wages over $250,000, but each spouse earns less than $200,000 individually, no Additional Medicare Tax will be withheld from your paychecks. In that case, you would owe the tax when you file your tax return.
You can claim a credit for any excess Additional Medicare Tax withheld by filing Form 1040 and including the proper adjustment — our tax refund calculator can help you estimate any overpayment.
The Additional Medicare Tax applies to combined wages and self-employment income above the threshold. If you have both W-2 wages and self-employment income, they are added together to determine whether you exceed the threshold. The Additional Medicare Tax is in addition to — not a replacement for — the base Medicare tax.
Net Investment Income Tax 3.8%
The Net Investment Income Tax (NIIT), also known as the Unearned Income Medicare Contribution Surtax, imposes an additional 3.8% tax on certain investment income for high-income taxpayers. Like the Additional Medicare Tax, the NIIT was enacted under the Affordable Care Act.
Who Pays the NIIT?
You are subject to the NIIT if your modified adjusted gross income (MAGI) exceeds the applicable threshold:
| Filing Status | MAGI Threshold |
|---|---|
| Single | $200,000 |
| Married Filing Jointly | $250,000 |
| Married Filing Separately | $125,000 |
| Head of Household | $200,000 |
| Qualifying Widow(er) | $250,000 |
What Counts as Net Investment Income?
Net investment income includes:
- Interest — taxable interest from bank accounts, bonds, and other investments
- Dividends — ordinary dividends and qualified dividends
- Capital gains — gains from selling stocks, bonds, mutual funds, and real estate
- Rental income — income from rental properties (unless derived from a trade or business)
- Royalties — income from intellectual property, mineral rights, etc.
- Passive business income — income from passive business activities
- Annuities — income from annuity contracts (unless from qualified retirement plans)
Not included: wages, self-employment income, Social Security benefits, tax-exempt interest, distributions from qualified retirement plans (401(k), IRA, pension), and income from active trades or businesses.
How NIIT Is Calculated
The NIIT is 3.8% of the lesser of:
- Your net investment income, or
- The amount by which your MAGI exceeds the applicable threshold
For example, if your MAGI is $300,000 (single) and you have $60,000 in net investment income, the NIIT would be 3.8% of $60,000 = $2,280 (since $300,000 - $200,000 = $100,000, which is greater than your $60,000 investment income). If your MAGI were $220,000 with the same $60,000 investment income, the NIIT would be 3.8% of $20,000 = $760.
The NIIT (3.8%) applies to investment income, while the Additional Medicare Tax (0.9%) applies to wages and self-employment income. These are separate taxes and can apply simultaneously. A high-income earner with both wages and investment income may owe both the Additional Medicare Tax on wages exceeding $200K and the NIIT on investment income exceeding $200K MAGI.
Use our tax refund calculator to estimate how NIIT and Additional Medicare Tax affect your overall tax liability — the calculator handles both surtaxes automatically.
Self-Employed Medicare Tax
Self-employed individuals pay Medicare tax as part of self-employment (SE) tax. Unlike W-2 employees who split the 2.9% with their employer, self-employed individuals pay the full 2.9% themselves — both the employee and employer portions.
Self-Employment Tax Breakdown (2025)
| Component | Rate | Wage Base Limit |
|---|---|---|
| Social Security (OASDI) | 12.4% | $176,100 |
| Medicare (HI) | 2.9% | No limit |
| Total SE Tax (base) | 15.3% | |
| Additional Medicare Tax (if applicable) | 0.9% | Over $200K/$250K |
Deducting Half of Self-Employment Tax
One major benefit for self-employed individuals: you can deduct the employer-equivalent portion of your self-employment tax (half of the total, or 7.65% of net earnings for the full 15.3% SE tax) as an above-the-line deduction on your Form 1040 (Schedule 1). This deduction reduces your adjusted gross income (AGI) and therefore your income tax liability.
For 2025, the deduction is 50% of total SE tax (not 50% of Medicare portion — it is half of the combined Social Security and Medicare taxes).
If you have both W-2 wages and self-employment income, your self-employment tax only applies to your net self-employment earnings. However, for purposes of the Additional Medicare Tax, your W-2 wages and self-employment income are combined to determine whether you exceed the $200,000 (single) or $250,000 (MFJ) threshold.
Use our self-employed tax calculator to estimate your full SE tax liability, including Medicare taxes and the self-employment tax deduction.
Medicare Tax on Wages vs Self-Employment
The way Medicare tax is applied differs significantly depending on whether you earn income as a W-2 employee or as a self-employed individual. Below is a direct comparison:
| Factor | W-2 Employee | Self-Employed |
|---|---|---|
| Employee portion | 1.45% | 2.9% (full rate) |
| Employer portion | 1.45% (paid by employer) | N/A (you pay both halves) |
| Total Medicare tax paid | 1.45% | 2.9% |
| Additional Medicare Tax | 0.9% (employee only) | 0.9% (on net earnings) |
| Tax deduction available | No | Yes — deduct 50% of SE tax |
| Withholding method | Withheld by employer | Paid via estimated quarterly tax payments |
| Reported on | Form W-2 | Schedule SE + Schedule 2 |
The self-employed effectively pay double the base Medicare tax compared to an employee (2.9% vs 1.45%). However, the ability to deduct half of self-employment tax reduces the net impact. For a more detailed comparison, explore our self-employed tax guide.
Compare your options with our self-employed calculator to see the full tax impact of Medicare, Social Security, and income taxes on your self-employment earnings.
How to Report Medicare Tax
Medicare tax is reported on several IRS forms depending on your employment status. Here is how to report it for the 2025 tax year:
For W-2 Employees
- Form W-2 — Your employer reports your total Medicare tax withheld in Box 4 (Social Security tax withheld) and Box 6 (Medicare tax withheld). The Additional Medicare Tax withheld is included in Box 6 if applicable.
- Form 1040 — Report total Medicare tax withheld from all W-2s on Line 25a (the Medicare tax withheld amount should be included in the total payroll taxes reported).
- Form 8959 — If you owe additional Medicare tax beyond what was withheld (or if you had excess withheld), file Form 8959 (Additional Medicare Tax) to calculate the correct amount. Attach it to your Form 1040.
For Self-Employed Individuals
- Schedule SE (Form 1040) — Calculate your self-employment tax (including the 2.9% Medicare portion) on Schedule SE.
- Schedule 2 (Form 1040) — Transfer the total SE tax amount from Schedule SE to Schedule 2, Line 4.
- Schedule 1 (Form 1040) — Deduct the employer-equivalent portion (50%) of your SE tax on Schedule 1, Line 15 (above-the-line deduction).
- Form 8959 — File if your total combined wages + self-employment income exceeds the Additional Medicare Tax threshold.
For the Net Investment Income Tax (NIIT)
- Form 8960 (Net Investment Income Tax) — Use this form to calculate your NIIT liability. It requires you to detail your net investment income and MAGI. Attach it to your Form 1040 if your MAGI exceeds the applicable threshold and you have investment income.
Our tax refund calculator handles Medicare tax, Additional Medicare Tax, and NIIT automatically — just enter your income details and filing status, and the calculator will show your full Medicare tax picture.
Medicare Exemptions
While Medicare tax applies broadly, certain groups of workers and types of income are exempt from Medicare tax:
Exempt from Medicare Tax
| Category | Details |
|---|---|
| Religious exemption | Members of recognized religious sects opposed to Social Security/Medicare (Form 4029) |
| Foreign government employees | Employees of foreign governments or international organizations |
| Nonresident alien students/scholars | Certain F-1, J-1, M-1, Q-1 visa holders working for a foreign employer |
| State/local government employees | Certain state and local government employees covered by an alternative retirement plan (Section 218 agreements) |
| Earned income below threshold | Very low earners below the SE tax filing threshold ($400 net earnings from self-employment) |
Income Not Subject to Medicare Tax
- Investment income — Dividends, capital gains, and interest (though these may be subject to NIIT)
- Rental income — From real estate (unless received in the course of a trade or business)
- Social Security benefits — Not subject to Medicare tax
- Child support — Not taxable for Medicare purposes
- Workers' compensation — Exempt from Medicare tax
- Certain fringe benefits — Employer-provided health insurance, group-term life insurance, etc.
A Medicare tax exemption means the worker is not required to pay Medicare tax on their wages, and the employer is not required to match. Non-taxable income means the type of income is simply not classified as Medicare-taxable wages. If you qualify for an exemption, you must apply using the appropriate IRS forms — you cannot simply decline to pay.
State Medicare Tax Rules
Medicare tax is a federal tax — it is the same in every state. However, there are some important state-level considerations:
No State Medicare Tax
There is no state-level Medicare tax. Unlike income tax and sales tax, which vary by state, Medicare tax is a uniform federal payroll tax that applies equally in all 50 states and the District of Columbia. Your Medicare tax rate does not change based on where you live or work.
State Tax Treatment of Medicare-Related Items
| Item | State Treatment |
|---|---|
| Self-employment tax deduction | Most states follow federal treatment — the SE tax deduction is allowed on state returns |
| Additional Medicare Tax | Same as federal — states generally follow federal rules for tax withholding |
| Medicare benefits (premiums) | Medicare Part B and D premiums may be deductible as medical expenses on state returns |
| Medicare wages vs state wages | Some states have different rules for what counts as wages — check your state's guidance |
States with No Income Tax (9 States)
While Medicare tax is federal, residents of these states do not pay state income tax on their Medicare-taxable wages. This includes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. However, the federal Medicare tax still applies in full.
For a complete comparison, see our state tax rates guide.
No state has its own equivalent of the federal Medicare tax. Some states have their own disability insurance programs (e.g., California SDI, New York PFL, Rhode Island TDI) that are funded through separate payroll deductions, but these are not Medicare taxes — they fund state-specific programs. Medicare tax is strictly federal.
Frequently Asked Questions
As a tax content specialist, I verify every Medicare tax figure in this guide against official IRS sources including Publication 15 (Employer's Tax Guide), the IRS Additional Medicare Tax page, and Form 8960 instructions. Medicare tax is often confused with Social Security tax, and the Additional Medicare Tax and NIIT thresholds are commonly misunderstood. I update this guide whenever the IRS publishes new guidance or when tax legislation changes Medicare tax provisions.
— Lead Tax Content Strategist, TaxCalcHQ