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How the Medicare Tax Rate is Changing

Summary: The total Medicare tax rate in 2024 is 2.9%. However, as an employed individual, you are only responsible for half or 1.45% and your employer is responsible for covering the other half. If you are self-employed, you must cover the full 2.9% Medicare tax rate for the full amount of your earned income for the year. Estimated Read Time: 6 min

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Table of Contents:

  1. What is the Medicare Tax Rate for 2024?
  2. What is OASDI Tax?
  3. How Much is Social Security and Medicare Tax?
  4. What is the Social Security Tax Limit?
  5. What is Additional Medicare Tax?
  6. How Does the Medicare Tax Work?
  7. Medicare Tax Rate FAQs

The Medicare tax rate is set by the IRS each year and determines how much of your earned income will be deducted for Medicare payroll taxes. Although the amount can change at any time, it is rare for the Medicare tax rate to change more than once annually.

When you are employed by a company, both you and your employer will contribute to Medicare taxes. However, if you are self-employed, you become responsible for paying the full Medicare tax amount.

Below, we review the Medicare tax rate for 2024 and how your monthly income may be impacted.

What is the Medicare Tax Rate for 2024?

Medicare tax is one of two taxes all employees and employers in the United States are required to pay under the Federal Insurance Contributions Act.

The total Medicare tax rate in 2024 is 2.9%. However, as an employed individual, you are only responsible for half or 1.45% and your employer is responsible for covering the other half of the Medicare tax rate.

If you are self-employed, you must cover the full 2.9% Medicare tax rate for the full amount of your earned income for the year. Additionally, there is no wage limit for Medicare tax. Thus, all of the income you earn, regardless of how much, will be subject to Medicare payroll tax.

Medicare taxes help fund Medicare Part A premiums and benefits for those who qualify. Once you turn 65, if you have paid into Medicare tax for at least 10 years, you will not be responsible for the Medicare Part A premium.

Essentially, paying Medicare tax is a way for you to pre-pay your premiums before you enroll in the coverage. However, paying these taxes is not optional. If you work in the United States, even if you do not plan on utilizing Medicare, you must still pay Medicare taxes.

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What is OASDI Tax?

Old-Age, Survivors, and Disability Insurance (OASDI) tax is another term for the Social Security payroll tax.

The OASDI tax rate is a percentage of your payroll that goes towards funding the Social Security program. In 2024, the social security tax rate is 12.4%.

Similar to Medicare tax, you are only responsible for half of this rate, or 6.2% while your employer is responsible for the other half. Anyone self-employed will need to pay the full 12.4% Social Security tax rate for their earned income.

The OASDI tax you pay while you are working is used to fund the Social Security program that compensates you once you have retired.

Further, the Social Security Surplus helps fund the national deficit. While there are always rumors of Social Security running out of funds. These claims are not correct. The National Committee to preserve Social Security and Medicare works to diligently to keep the federal benefits available now and in the future.

How Much is Social Security and Medicare Tax?

The Federal Insurance Contributions Act tax combines the Medicare and Social Security tax rate into one. This is known as FICA. FICA taxes include both the Social Security Administration tax rate of 12.4% (6.2%) and the Medicare tax rate of 2.9% (1.45%).

When combined, the total FICA tax rate is 15.3%. With the employer being responsible for 7.65% and the employee being responsible for the other 7.65%.

What is the Social Security Tax Limit?

Social Security taxes stop once your annual income has reached $168,600. However, the Medicare tax rate still applies. The limit is the Social Security wage base.

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So, no matter how much money you make, you’ll never pay more than $10,453.20 in Social Security taxes or $20,906.40 if self-employed.

However, do keep in mind that this wage base can increase every year, so you may pay more for Social Security tax in 2025 than you will in 2024.

What is Additional Medicare Tax?

The Affordable Care Act enforces high wage earners to pay an extra Medicare payroll tax, or Medicare surtax, of 0.9% on earned income. Single filers with an income of at least $200,000 will need to pay the additional Medicare tax.

All U.S. employees have to pay the Medicare tax regardless of their citizenship or residency status.

Married individuals who file separately will pay an extra tax if income is $125,000 or more. But if married and filing jointly, you’ll be subject to a fee when combined income is $250,000 or more. The additional Medicare tax combines the typical Medicare tax rate with the 0.9% surtax, totaling 2.35%.

This cost will be added to your Social Security and state income taxes.

How Does the Medicare Tax Work?

Medicare taxes are taken out of your paycheck and the percentage of your income that is withheld for Medicare tax is 1.45%. Your employer will then match the rate you pay. But if you’re self-employed, you’ll pay the full 2.9%.

The funds collected from Medicare taxes go into a large Medicare tax bucket that is then used to help pay hospitals and providers for services covered by Medicare Part A. Additionally, this tax allows you to pay a $0 premium for Medicare Part A once you turn 65 if you have paid into the tax for at least 40 quarters.

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Medicare tax accounts for 89% of the total revenue for Medicare Part A which amounts to nearly $353 billion each year. Thus, without the Medicare tax in place, Medicare Part A could be a costly service for seniors eligible for Medicare.

Medicare Tax Rate FAQs

Do I need to pay Medicare taxes if I am on Medicare?

As long as you’re working, you’ll need to pay Medicare taxes on your earnings. Even if you’re on Medicare while working. No matter what age you are, you’ll need to pay FICA taxes on your earned income.

How are Social Security and Medicare tax calculated?

You can calculate your Social Security and Medicare tax by taking your gross income and multiplying it by 7.65%. This is the amount of your company’s Social Security and Medicare tax matching contribution.

Is there a cap on Medicare tax?

Currently, no wage limit for Medicare tax exists; 1.45% is applied to all covered wages.

When can I stop paying Medicare tax?

For as long as you have earned income, you’ll continue to contribute to Social Security and Medicare with FICA taxes. But, if you have no earned income, you won’t pay Social Security or Medicare taxes.

Kayla Hopkins

Kayla Hopkins

Content Editor
Kayla Hopkins is an accomplished writer and Medicare guru serving as the Editor of MedicareFAQ.com. Upon completing her Communications degree from Ohio University, Kayla dedicated her time to understanding the ever-evolving landscape of healthcare. With her extensive background as a Licensed Insurance Agent, she brings a wealth of knowledge and expertise to her writing.
Ashlee Zareczny

Ashlee Zareczny

Compliance Manager
Ashlee Zareczny is the Compliance Manager for MedicareFAQ. As a licensed Medicare agent in all 50 states, she is dedicated to educating those eligible for Medicare by providing the necessary resources and tools. Additionally, Ashlee trains new and tenured Medicare agents on CMS compliance guidelines. Ashlee is a Medicare expert who specializes in Medicare Supplement, Medicare Advantage, and Medicare Part D education.

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