Medicare tax is a federal payroll tax shared by employees and employers. In 2026, employees and employers generally each pay 1.45% of an employee’s Medicare taxable wages.

Unlike Social Security tax, Medicare tax has no annual wage limit. Employers must also withhold an additional 0.9% from wages paid to an employee after the employee’s calendar-year wages exceed $200,000. Employers do not match this additional tax.

• Medicare tax is part of FICA and is generally shared equally by employees and employers.  
• For 2026, both pay 1.45% on Medicare-taxable wages, with no annual wage limit.  
• Employers must withhold an additional 0.9% Additional Medicare Tax once an employee’s wages exceed $200,000 during the calendar year.  
• The employer does not match the additional 0.9%.  
• Medicare wages can include regular pay, overtime, bonuses, commissions, reported tips, and taxable benefits.  
• Employers should correctly track Medicare wages, withholding, and YTD amounts.  
• Form W-2 reports Medicare wages in Box 5 and Medicare tax withheld in Box 6.  
• Accurate payroll records help employers avoid common Medicare tax and reporting errors. 

What Is Medicare Tax?

Medicare tax is part of the Federal Insurance Contributions Act, commonly known as FICA. Employers withhold the employee’s share from each paycheck and contribute a separate employer share.

The standard 1.45% tax applies to all covered Medicare wages because there is no annual Medicare wage-base limit.

Who Is Required to Pay Medicare Tax?

Medicare tax is calculated using Medicare taxable wages, not necessarily the employee’s total gross pay or federal taxable wages.

Medicare wages can include:

• Regular salary or hourly wages
• Overtime earnings
• Bonuses and commissions
• Reported tips
• Taxable fringe benefits
• Other covered compensation

The amount is generally reported in Box 5 of Form W-2.

The tax treatment of deductions also matters. Traditional pre-tax 401(k) salary deferrals generally reduce federal income-tax wages but remain subject to Social Security and Medicare taxes. Certain qualified benefits provided through a cafeteria plan may be excluded from Medicare wages.

Employers should therefore calculate Medicare tax from the correct Medicare wage amount rather than automatically applying the rate to every gross-pay figure.

How to Calculate Medicare Tax

Assume an employee has $2,500 in Medicare taxable wages for a pay period.

Combined Medicare Tax

Only the employee’s $36.25 withholding reduces the employee’s net pay. The employer contribution is a separate business payroll-tax expense.

How Does Additional Medicare Tax Work?

Employers must begin withholding the additional 0.9% Medicare tax during the pay period in which wages paid to an employee exceed $200,000 for the calendar year.

This employer withholding rule applies regardless of:

• The employee’s filing status
• The employee’s spouse’s income
• Earnings from another employer
• Whether the employee will ultimately owe Additional Medicare Tax

Once the employee crosses $200,000, the employer continues withholding the extra 0.9% through the end of the calendar year. The employer does not contribute a matching amount.

The employee’s final Additional Medicare Tax liability may depend on filing status. The individual thresholds are $250,000 for married couples filing jointly, $125,000 for married filing separately, and $200,000 for other taxpayers.

Medicare Tax vs Social Security Tax

Medicare and Social Security taxes are both part of FICA, but they do not follow the same wage-limit rules.

An employer must not stop withholding standard Medicare tax when an employee reaches the Social Security wage limit. Medicare tax continues on all covered wages.

How Employers Report and Deposit Medicare Tax

Employers generally report Medicare wages, employee withholding, and the employer share on Form 941, Employer’s Quarterly Federal Tax Return.

On Form W-2:

• Box 5 shows Medicare wages and tips.
• Box 6 shows Medicare tax withheld, including any Additional Medicare Tax withheld.

Employers must deposit federal income, Social Security, and Medicare taxes electronically according to their applicable deposit schedule. Deposit deadlines are separate from quarterly Form 941 filing deadlines. Certain reporting errors may be corrected using Form 941-X.

Common Medicare Tax Mistakes

Employers should avoid

Accurate payroll inputs and year-to-date wage records are especially important when an employee approaches the Additional Medicare Tax threshold.

How SecurePayStubs Helps Shows Medicare Tax

SecurePayStubs calculates Medicare tax using the employee and payroll information entered by the user. The generated pay stub can show the employee’s current Medicare withholding alongside gross earnings, other taxes, deductions, net pay, and year-to-date totals. 

Employers should review the wage and deduction information before finalizing a pay stub. Using a pay-stub generator does not replace the employer’s responsibility to deposit payroll taxes, file employment-tax returns, and follow applicable tax requirements. 

Conclusion

Employers generally withhold 1.45% Medicare tax from employee wages and contribute an equal amount. Because Medicare tax has no annual wage cap, withholding continues after an employee reaches the Social Security wage limit. 

Employers must also begin withholding the additional 0.9% Medicare tax once an employee’s calendar-year wages exceed $200,000. Correctly identifying Medicare taxable wages, monitoring YTD earnings, and separating employee withholding from employer contributions are essential for accurate payroll records and pay stubs.