Medicare tax

What is Medicare tax?

Medicare is a federally administered health insurance program in the United States that primarily covers individuals aged 65 and older, as well as some younger people with disabilities or specific medical conditions. It is funded in part by payroll taxes under the Federal Insurance Contributions Act (FICA), with both employees and employers contributing.

As of 2025, the Medicare tax rate is 1.45% of an employee’s wages, paid by both the employee and employer (totaling 2.9%).

Note that high earners (i.e., single-filer employees earning more than $200,000 per year) are also subject to an additional 0.9% Medicare surtax. This is paid only by the employee, not the employer.

Why is Medicare tax important for employers?

Employers must correctly calculate and remit Medicare taxes for all employees, regardless of whether the employee is currently enrolled in Medicare. These taxes apply to all earned wages, with no income cap (unlike Social Security contributions, which are capped annually).

Failing to withhold and remit Medicare taxes can result in penalties, interest, and IRS audits. Employers should also be aware of their responsibilities when employees transition into Medicare eligibility, especially if offering group health plans or retirement benefits.

See also:The employer’s guide to FICA taxes

How can Remote help?

Remote helps ensure full compliance with FICA tax requirements, including Medicare tax withholding and remittance, for US-based employees. Learn more.