Medicare tax is a federal employment tax in the United States used to fund the Medicare health insurance program, specifically Medicare Part A, which covers hospital insurance for senior citizens and certain disabled individuals. This tax helps pay for hospital visits, hospice care, nursing home care, and some home healthcare. As of 2024, the Medicare tax rate is 2.9% of an employee's wages, split evenly between the employee and employer, with each paying 1.45%. Self-employed individuals pay the full 2.9% themselves but can deduct half of it on their tax return. Unlike Social Security tax, there is no income limit on the wages subject to Medicare tax, meaning it applies to all earnings. Additionally, high earners pay an extra 0.9% Medicare surtax on wages exceeding certain thresholds (e.g., $200,000 for single filers), which is only paid by the employee, not matched by the employer. In summary:
- Medicare tax funds Medicare Part A (hospital insurance).
- The standard Medicare tax rate is 2.9%, divided between employer and employee.
- No wage limit applies; all earnings are subject to this tax.
- An additional 0.9% surtax applies for higher incomes above specified thresholds.
This tax is withheld from employees’ paychecks or paid as self-employment tax to help sustain Medicare benefits for eligible individuals.
