Medicare tax (US)
The 1.45% US payroll tax that funds Medicare — no wage cap, plus a 0.9% additional surcharge above $200,000.
Medicare tax is the second component of FICA. Employees pay 1.45% on ALL wages — there is no wage cap, unlike Social Security tax. Employers match the 1.45%. Wages above $200,000 (single) or $250,000 (married filing jointly) carry an additional 0.9% Medicare surtax on the employee side only — the employer does not match this.
The base 1.45% rate applies from the first dollar earned. A worker on $80,000 pays $1,160 in Medicare tax (1.45%). A worker on $300,000 pays $4,350 base + $900 surtax = $5,250 total (an effective Medicare rate of about 1.75%).
Medicare tax funds the Medicare Trust Fund, which covers hospital insurance (Part A) for Americans aged 65 and over. The Net Investment Income Tax (NIIT) of 3.8% on investment income above similar thresholds is sometimes called the Medicare surtax but is administered separately by the IRS and not modeled here.
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See also
- FICA (Social Security + Medicare) — The US payroll tax that funds Social Security and Medicare — flat-rate, applies before federal income tax.
- Social Security tax (US) — The 6.2% US payroll tax that funds Social Security retirement and disability — capped at the annual wage base.
- Standard deduction (US federal) — The flat amount subtracted from gross income before federal-income-tax brackets apply — $15,000 single (2025).