Medicare Tax: A tax that funds the Medicare program, which provides health insurance to eligible workers.
Medicare tax is a tax that is used to fund the Medicare program, which provides health insurance to eligible workers in the United States. The Medicare program is primarily funded through payroll taxes, with both employees and employers required to contribute.
Medicare tax is assessed on all earnings from employment, including salaries, wages, and tips. The tax rate for Medicare is currently set at 1.45% of an employee's gross income, with both the employee and employer contributing an equal amount. Self-employed individuals are required to pay the entire 2.9% tax rate themselves.
In addition to the payroll tax, higher earners may be subject to an additional Medicare tax of 0.9% on wages over a certain threshold. The threshold for this additional tax varies depending on the individual's filing status and is currently set at $200,000 for single filers and $250,000 for joint filers.
The funds generated by Medicare taxes are used to provide health insurance to eligible workers who are over the age of 65, as well as certain individuals with disabilities and individuals with end-stage renal disease. The Medicare program covers a range of medical services, including hospital stays, doctor visits, and prescription drugs.
Employers are responsible for withholding Medicare taxes from their employees' paychecks and depositing them with the IRS. Failure to comply with Medicare tax requirements can result in legal penalties and damage to an employer's reputation.
In conclusion, Medicare tax is a tax that funds the Medicare program, which provides health insurance to eligible workers in the United States. Both employees and employers are required to contribute to Medicare through payroll taxes, with higher earners potentially subject to an additional tax. Employers are responsible for complying with Medicare tax requirements and ensuring that they are accurately withholding and depositing taxes with the IRS.