Medicare Tax Explained (2026): The 1.45% That Never Stops

The Deduction With No Ceiling

Most payroll deductions eventually ease off. Social Security stops once you reach the annual wage base. Federal income tax withholding settles down if your pay is steady. Medicare does neither. It takes 1.45% of every dollar of wages, from your first shift in January to your last overtime hour in December, and it never gets smaller.

That is the single most useful thing to know about it. There is no month where Medicare quietly disappears from your stub.

What Counts as Medicare Wages

Almost everything you are paid for working: regular hours, overtime, double time, shift differentials, holiday premiums, tips reported through payroll, commissions, bonuses and most cash awards. If it is compensation for labour, it is a Medicare wage.

The exceptions are narrow. Section 125 cafeteria-plan health premiums, HSA contributions run through payroll, and dependent care FSA money come out before Medicare applies. A traditional 401(k) deferral does not — it lowers your income tax and leaves Medicare untouched, which surprises a lot of people the first time they compare their pay stub with their W-2.

The 0.9% Additional Medicare Tax

Above certain wage levels an extra 0.9% applies to the excess only:

• $200,000 for single filers
• $250,000 for married filing jointly
• $125,000 for married filing separately

Your employer starts withholding it once your wages with that employer pass $200,000, regardless of your filing status, because they cannot see your spouse's income. That mismatch is normal and gets trued up when you file. Employers do not match the 0.9% — it is an employee-only tax.

A Worked Overtime Week

Take a maintenance technician at $32 an hour who works 40 regular hours and 12 overtime hours.

• Regular pay: 40 × $32 = $1,280
• Overtime pay: 12 × $48 = $576
• Gross: $1,856
• Medicare at 1.45%: $26.91

The same worker on a 40-hour week pays $18.56. The rate did not move; the base did. This is why "overtime is taxed more" is a misreading — the percentage is identical, the dollars simply scale with the hours.

Self-Employed? Double It

Without an employer to match, self-employment tax charges the full 2.9% Medicare rate on 92.35% of net earnings, with the same 0.9% surtax above the thresholds. Half of the self-employment tax comes back as a deduction on your return, which softens the hit but does not remove it.

Run Your Own Numbers

Use the Medicare tax calculator to see your per-paycheck and annual figures, the Social Security tax calculator for the capped half, and the FICA calculator for both at once. If you are checking a year-end statement, the W-2 calculator shows why Box 5 is higher than Box 1.