Medicare Tax

Katelynn Minott, CPA & CEO July 11th, 2026

Medicare tax is the hospital insurance portion of U.S. payroll tax. It applies to wages subject to FICA and to self-employment income subject to self-employment tax, including qualifying self-employment income earned by U.S. citizens and residents abroad.

Why it matters for U.S. expats

Medicare tax often matters most for self-employed U.S. expats, because the Foreign Earned Income Exclusion can reduce income tax but does not reduce U.S. self-employment tax. Expats working abroad may also need to review whether their wages are subject to U.S. payroll tax, whether a totalization agreement changes the result, and whether high income triggers Additional Medicare Tax.

Common questions

1. Do U.S. expats pay Medicare tax?

Yes, when their wages or self-employment income are subject to U.S. Social Security and Medicare tax. This is common for self-employed U.S. expats and for employees whose wages are subject to FICA.

2. What is the Medicare tax rate?

The standard Medicare tax rate is 1.45% for employees and 1.45% for employers, or 2.9% total. Self-employed taxpayers pay the Medicare portion through self-employment tax.

3. Is there a wage limit for Medicare tax?

No. Medicare tax has no wage base limit, so all covered wages are subject to Medicare tax.

4. Do self-employed U.S. expats pay Medicare tax?

Yes, if net self-employment earnings are at least $400 and no totalization agreement or other exception removes the U.S. self-employment tax obligation.

5. Does the Foreign Earned Income Exclusion reduce Medicare tax?

No. The Foreign Earned Income Exclusion can reduce income tax on qualifying foreign earned income, but it does not reduce U.S. self-employment tax, including the Medicare tax portion.

6. Does the Foreign Tax Credit reduce Medicare tax?

No. The Foreign Tax Credit reduces income tax for eligible foreign income taxes paid. It does not reduce Medicare tax or self-employment tax.

7. What is Additional Medicare Tax?

Additional Medicare Tax is a 0.9% tax on Medicare wages, RRTA compensation, and self-employment income above the threshold for the taxpayer’s filing status.

8. What are the Additional Medicare Tax thresholds?

The thresholds are $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for single, head of household, or qualifying surviving spouse. These thresholds are not indexed for inflation.

9. Can a totalization agreement affect Medicare tax?

Yes. Totalization agreements coordinate Social Security coverage between the U.S. and another country and can determine whether self-employment tax, including the Medicare portion, is paid to the U.S. or the foreign country.

10. Do Medicare taxes paid abroad count as Foreign Tax Credits?

No. Foreign social security or Medicare-type contributions are not usually creditable foreign income taxes. They may be addressed through a totalization agreement instead.

11. What form reports Medicare tax for self-employed expats?

Self-employed taxpayers calculate self-employment tax on Schedule SE and attach it to Form 1040.

12. What form reports Additional Medicare Tax?

Form 8959 is used to calculate Additional Medicare Tax and reconcile any Additional Medicare Tax withheld.

When to get help

Professional guidance is important when:

You are self-employed abroad.
You claimed the Foreign Earned Income Exclusion and still need to calculate self-employment tax.
You work for a U.S. employer while living abroad.
You work in a country with a totalization agreement.
You paid foreign social security contributions and need to know whether U.S. self-employment tax still applies.
Your wages or self-employment income may trigger Additional Medicare Tax.
You need to coordinate Schedule C, Schedule SE, Form 8959, estimated tax payments, and expat tax benefits.

Bright!Tax can calculate Medicare tax and self-employment tax, review totalization agreement coverage, and prepare the forms needed for U.S. expat filing. Get started with Bright!Tax.

Official sources

Reviewed by

Katelynn Minott, CPA & CEO

Last reviewed

July 2026

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