What is Medicare Tax?
Employees, companies, and self-employed individuals contribute to Medicare by paying a tax equal to a percentage of their gross salaries. Employers are obligated under the Federal Insurance Contributions Act (FICA) to withhold and pay the appropriate amount of Medicare and Social Security taxes from employee paychecks on a timely basis. Serious fines may be imposed for breaking the law.
How Much is Medicare Tax?
The current tax rate for the employee and employer Medicare tax rate will be Medicare is 1.45%. This is the amount that will be withheld from your paycheck, plus an extra 1.45% donated on your behalf by your employer. The Additional Medicare Tax is a surtax paid by those taxpayers whose income exceeds the applicable limits.
How to Calculate Medicare Tax?
The Medicare tax is a form of federal taxation in the United States that is used to finance the Medicare health insurance program for persons who are 65 or older and have certain disabilities.
As a payroll tax, the Medicare contribution is taken out of an employee’s paycheck and then sent directly to the government.
The percentage of wages subject to Medicare tax varies according to the employee’s adjusted gross income. The 1.45% Medicare tax rate applies to annual salaries of less than $200,000. The percentage of an employee’s salary that is in excess of $200,000 per year is subject to 0.9% Medicare taxes.
The Medicare tax is a payroll tax, but it is distinct from the Social Security tax that is also withheld from an employee’s paycheck. Both employees and employers must pay 6.2% of their incomes into Social Security.
An employee’s Medicare tax is determined by multiplying their gross pay salary by the applicable Medicare tax rate, which is subsequently deducted by the employer.
The Medicare tax for an employee with $1,000 in gross compensation for a given pay period would be determined as follows.
$1,000 x 0.0145 = $14.50
The company would withhold $14.50 from each employee’s salary and send it to Medicare.
Also, See: Long-Term Disability Insurance Premium