As an employee, you pay Medicare tax via withholding, which means your employer takes the tax out of your paychecks before you’re actually paid. The Medicare withholding rate has stayed the same since 1986. At the time of publication, your employer withholds Medicare at 1.45 percent of all your taxable wages. Most employees, whether single or married, are subject to this rate.
You and your employer pay the same amount for Medicare tax. Note that Medicare makes up one part of the Federal Insurance Contributions Act, and Social Security makes up the other portion, which is why both of these taxes are often collectively called FICA taxes. Social Security has an annual wage limit, but Medicare tax is taken out of all taxable wages.
To calculate Medicare withholding, multiply your wages for the pay period by the withholding percentage. Suppose you earn $1,150 biweekly in taxable wages. Multiply $1,150 by .0145, to arrive at $16.68, which is your Medicare withholding for the pay period. Keep in mind that Medicare withholding is based on taxable wages, so subtract any nontaxable wages and pretax deductions you might have from your gross wages to get taxable wages. Common nontaxable wages include mileage, meal and lodging reimbursements. Pretax deductions include qualified company-sponsored health and retirement benefits.
Your employer is supposed to pay all taxes withheld from your paycheck to the IRS. Specifically, it pays withholding for Medicare tax, Social Security tax and federal income tax, and its portion of Medicare and Social Security taxes, together, to the IRS, semiweekly or monthly. Your employer can face civil and criminal penalties for intentionally not paying the taxes it took out of your paychecks. If for any reason your employer doesn’t deduct any taxes from your wages, you’re responsible for paying them. When preparing your tax return, you may use Form 8919 to pay unpaid Medicare tax and to get credit for Medicare benefits.
Unless you work one of the few jobs that are exempt from Medicare tax, your employer must withhold the tax from your paychecks. For example, if you work for a college or university at which you’re also a student, you might be exempt from Medicare tax. Also, specific non-immigrants and nonresident aliens with A-visas, D-visas, F-visas, J-visas, M-visas, Q-visas, G-visas and H-visas are exempt from Medicare tax.
- Social Security Administration: Social Security and Medicare Tax Rates
- IRS: Taxable or Nontaxable Income?
- IRS: Topic 758 - Form 941 – Employer's Quarterly Federal Tax Return and Form 944 – Employer's Annual Federal Tax Return
- IRS: Employment Tax Enforcement
- IRS: Student Exception to FICA Tax
- IRS: Foreign Student Liability for Social Security and Medicare Taxes
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.