The FICA HI tax is the Hospital Insurance portion of the Federal Insurance Contributions Act payroll tax, better known as the Medicare tax. It runs a combined 2.9% of your gross wages, split evenly between you and your employer at 1.45% each, and it funds Medicare Part A, which covers hospital stays, skilled nursing care, hospice, and some home health services.1Social Security Administration. Parts of Medicare High earners owe an extra 0.9% on income above set thresholds.2Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide
The Rate and How It Comes Out of Your Paycheck
Your employer withholds 1.45% of your wages each pay period and contributes a matching 1.45% out of its own funds.3Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates You’ll see your share listed on your pay stub, often labeled “Medicare” or “FICA-HI.” At year end, total Medicare wages and the amount withheld show up in Boxes 5 and 6 of your Form W-2.4Internal Revenue Service. About Form W-2, Wage and Tax Statement
The tax applies to nearly all cash compensation: salary, hourly wages, bonuses, commissions, and most fringe benefits.
No Wage Cap
Unlike the Social Security half of FICA, which stops applying once your wages hit $184,500 in 2026, the Medicare tax has no ceiling.2Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide Every dollar of covered wages gets taxed, whether you earn $30,000 or $3 million. That’s a key difference to keep in mind when you’re comparing your Medicare withholding against your Social Security withholding on a large bonus or year-end payout.
What Reduces Your Medicare Wage Base, and What Doesn’t
A common misconception is that pre-tax 401(k) contributions lower Medicare tax. They don’t. Traditional 401(k) salary deferrals still count as FICA wages, even though they reduce your federal income tax.5Internal Revenue Service. Are Retirement Plan Contributions Subject to Withholding for FICA, Medicare, or Federal Income Tax Roth 401(k) contributions get the same treatment.
Health Savings Account contributions are the notable exception. When your employer routes HSA contributions through a Section 125 cafeteria plan, those dollars are exempt from FICA entirely.6Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans Contributing to an HSA on your own outside a cafeteria plan doesn’t get the same treatment; you still owe Medicare tax on that money. Employer-facilitated HSA contributions are one of the few payroll deductions that genuinely shrinks your Medicare tax bill.
The Extra 0.9% on High Earners
On top of the standard 1.45% employee share, high-income workers owe an Additional Medicare Tax of 0.9% on earned income above set thresholds. Employers do not match this surtax; it falls entirely on the employee.7Internal Revenue Service. Topic No. 560, Additional Medicare Tax
The threshold depends on how you file:
- Married filing jointly: $250,000 of combined earned income
- Single, head of household, or qualifying surviving spouse: $200,000
- Married filing separately: $125,000
W-2 wages and net self-employment earnings are added together before measuring against the limit.7Internal Revenue Service. Topic No. 560, Additional Medicare Tax
The $200,000 Employer Rule
Your employer doesn’t know your filing status or your spouse’s income. So the IRS uses a flat trigger: once a single employer pays you more than $200,000 in a calendar year, that employer must start withholding the extra 0.9% from every paycheck for the rest of the year, no matter your marital status.2Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide
That flat trigger creates mismatches. A married couple filing jointly where each spouse earns $150,000 has combined income of $300,000, which is $50,000 over their $250,000 threshold, yet neither employer withholds the surtax because neither paycheck hit $200,000. On the other side, a joint filer earning $210,000 alone will see withholding start at $200,000 even though the household threshold is $250,000.8Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
Squaring Up on Form 8959
You reconcile everything on Form 8959, attached to your Form 1040.9Internal Revenue Service. 2025 Instructions for Form 8959 – Additional Medicare Tax If your employer withheld more than you actually owe, the excess credits against your overall tax bill. If too little was withheld, you owe the difference at filing time.
If you expect a shortfall, consider making estimated tax payments or requesting extra income tax withholding through a new Form W-4. You cannot earmark estimated payments specifically for the Additional Medicare Tax; the IRS applies them to your total tax liability.8Internal Revenue Service. Questions and Answers for the Additional Medicare Tax To avoid an underpayment penalty, keep combined withholding and estimated payments at 90% of your current-year tax or 100% of last year’s tax, whichever is less.10Internal Revenue Service. Topic No. 306, Penalty for Underpayment of Estimated Tax
If You’re Self-Employed
When you work for yourself, there’s no employer to cover half the tax. You pay the full 2.9% Medicare rate on your net self-employment earnings, reported on Schedule SE.11Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The calculation applies to 92.35% of your net business profit rather than the full amount, which mirrors the tax break employees get from not paying FICA on the employer’s share.12Social Security Administration. If You Are Self-Employed
You can also deduct half of your total self-employment tax (both the Social Security and Medicare portions) when figuring adjusted gross income. That deduction reduces your income tax, but it doesn’t reduce the self-employment tax itself.11Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
The 0.9% Additional Medicare Tax applies here too. Net self-employment earnings are combined with any W-2 wages, and the surtax kicks in on the portion above your filing-status threshold.7Internal Revenue Service. Topic No. 560, Additional Medicare Tax Earn $120,000 from an employer and $100,000 freelancing while filing single, and the last $20,000 picks up the extra 0.9%.
Who Doesn’t Pay It
Almost everyone earning wages pays the Medicare tax. A few narrow exemptions exist:
- Members of recognized religious groups that have provided for their dependents since at least December 31, 1950, and that conscientiously oppose insurance benefits, can apply on Form 4029. Approval permanently waives all Social Security and Medicare benefits.13Internal Revenue Service. Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits
- Foreign students on F-1, J-1, or M-1 visas who have been in the U.S. fewer than five calendar years, on wages tied to their visa purpose.14Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
- Students enrolled at least half-time working for the same school they attend, when the job is incidental to their studies.14Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
- A child under 18 working in a parent’s sole proprietorship or in a partnership where both partners are the child’s parents. For domestic work in a parent’s private home, the exemption runs until age 21. It disappears if the business is a corporation or includes non-parent partners.15Internal Revenue Service. Family Employees
One boundary worth noting: the Medicare tax on wages is separate from the Net Investment Income Tax, which is a different 3.8% charge on interest, dividends, capital gains, rents, and royalties above the same $200,000/$250,000/$125,000 thresholds.16Internal Revenue Service. Topic No. 559, Net Investment Income Tax The two use similar numbers but hit different kinds of income, and a high earner with significant investments can owe both in the same year.