Medicare Tax: Definition, Rates, And Why You Pay Them

Simply put, Medicare Tax is a federal payroll tax that assists in funding the Medicare program. In this article, read and find out more about Medicare tax, its rates, and why you pay them.

Medicare Taxes [Photo: SmartAsset.com]

According to Turner, there is money that is not subject to the Medicare taxes. These include the wages of an ordained, commissioned, or licensed minister of a church. It also includes money paid to a child aged below 18 who works for a parent under certain conditions. The money of student nurses for services they performed under certain conditions is also not included. Lastly, foreigners working in the U.S. on work or student visas are also exempted.

Medicare Tax Rate

An article from H&R Block says that the Medicare tax rate is 2.9% of an income. For individuals who are self-employed, the Medicare taxes are included in the self-employment tax. These individuals are responsible for paying the full 2.9%. On the contrary, for an employee who works for an employer, the employee pays the half of it and the employer pays the other half. This means that an employee and an employer pay 1.45% each of their wages. Those with higher incomes may have to pay an additional Medicare tax of 0.9%.

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Why Pay For Medicare Taxes

Turner also states that almost all employees in the U.S., whether working for an American or foreign employer, pay Medicare taxes. All employers in the U.S. equal the amount of Medicare taxes the employees pay. However, there are specific limitations on the additional Medicare taxes paid by those who earn huge incomes. The Medicare tax funds the Medicare Part A (hospital insurance). This means it covers the care for hospital inpatients, skilled nursing facilities, hospice care, and home health care.

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