As of 2016, the standard Medicare tax rate on all wages and income from self employment is 2.9 percent, reports the Internal Revenue Service. Additionally, taxpayers whose income passes a certain threshold must pay an additional Medicare tax of 0.9 percent.
Employees pay 1.45 percent of the standard Medicare tax, which employers usually withhold from their wages, and employers pay the other 1.45 percent, explains the IRS. Although self-employed people have to pay the full 2.9 percent of Medicare taxes on their farming or business income, they can deduct half the amount as an adjustment to income, adds About.com. Unlike Social Security taxes, which have an earnings cap, the federal government imposes the Medicare tax on all wages and self-employment income without limit.
The additional Medicare tax threshold amount for wages, self-employment income and other compensation for couples filing jointly is $250,000, according to the IRS. For singles, heads of households, and qualifying widows or widowers with a dependent child, the threshold is $200,000. Unlike the standard Medicare tax of which employers pay a share, employees pay the entire 0.9 percent of the additional Medicare tax. When employees’ earnings pass the additional Medicare tax threshold, employers must withhold the tax from their wages. Self-employed individuals or employees who owe more than employers withhold must make estimated tax payments to compensate for any shortfalls.