Medicare tax rate

Definition

Medicare tax rate is the percentage of an employee's wages withheld by their employer to fund Medicare, a federal health insurance program. The current standard rate is 1.45% of gross earnings, with no income limit.

5 Must Know Facts For Your Next Test

1. The Medicare tax rate for employees is 1.45%.
2. Employers also contribute an additional 1.45% on behalf of each employee.
3. An Additional Medicare Tax of 0.9% applies to high-income earners above $200,000 (single) or $250,000 (married filing jointly).
4. There is no wage base limit for Medicare tax; it applies to all earnings.
5. Self-employed individuals pay both the employee and employer portions, totaling 2.9%.

Review Questions

Related terms

FICA:

Federal Insurance Contributions Act encompasses both Social Security and Medicare taxes.

Social Security Tax Rate: A separate payroll tax rate that funds Social Security benefits.

Additional Medicare Tax: An extra 0.9% tax applied to high-income earners exceeding certain thresholds.