Medicare Tax

Medicare tax is the smaller half of FICA and funds the federal Medicare program. Employees pay 1.45 percent of every dollar of wages and employers match it, for 2.9 percent total. Unlike Social Security tax, Medicare tax has no wage cap, so it applies to your entire salary no matter how high it goes.

High earners owe a bit more. The Additional Medicare Tax adds 0.9 percent on wages above a threshold that depends on filing status and is set by statute rather than adjusted for inflation, and only the employee pays that part. Like the rest of FICA, Medicare tax is charged on full wages and is not reduced by the standard deduction or by traditional 401(k) contributions. Our paycheck playbook shows how Medicare tax fits into your total withholding and take-home pay.