Medicare Tax

Posted in Human Resources Terms, Total Reads: 1156

Definition: Medicare Tax

In the US, Federal Insurance Contributions Act (FICA) taxes are deducted from the wages of every salaried/ working individual. The FICA tax actually consists of two taxes: a Social Security tax, currently at 6.2%, and a Medicare tax at 1.45% (for all employees). The same amount is paid to the Government by the employers too, as taxes. Hence, for every working employee earning $1000, a total amount of $290 ($145 from the employee, and $145 from the employer) goes to the Federal Government for its Medicare Programme.

The wages, salaries of individuals in service, as well as the business or farming income earned by self-employed individuals is subject to Medicare taxation. There is no limit on the amount of salary earned subject to Medicare taxes, unlike the annual wage limit for Social Security taxes (Currently at $87,500). Hence, every legally employed/ self-earning individual is mandated to pay the Medicare taxes

The Medicare Programme of US Government provides subsidized healthcare and insurance benefits to the elderly(individuals above the age of 65) or retirees and the disabled.

Hence, this concludes the definition of Medicare Tax along with its overview.

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