The Medicare tax is a mandatory payroll tax that pretty much everyone working pays. It has a flat tax rate like the Social Security tax but at a lower percentage. The Medicare tax rate is 1.45 percent of the employee’s income in which the employer matches and pays the taxes to the Internal Revenue Service.
As an employee, you won’t pay any Medicare taxes directly. Your employer will withhold this tax from your income. For example, if your gross pay is $1,000 weekly, your employer will withhold $14.5 of it. There is also the Social Security tax with an increased rate of 6.2 percent. In the example given, the total taxes paid for the purposes of Social Security and Medicare taxes would be $76.5, and the employee would get the net amount after federal income taxes.
Additional Medicare tax withholding
There is also the additional Medicare tax withholding for certain employees. If you’re someone that earns more than $200,000 as a single filer or $250,000 as a married couple filing a joint return, you are subject to the additional Medicare tax withholding.
The additional rate is 0.9 percent on top of 1.45 percent. However, you won’t pay 2.35 percent of your total income in additional Medicare taxes. You will only pay a total of 2.35 percent of income in Medicare taxes for the income you earn above the threshold. So, the income earned below the threshold is only subject to a 1.45 percent Medicare tax.
Is Medicare tax-deductible?
The Medicare taxes paid through payroll taxes aren’t deductible. But, if you’re paying Medicare premiums, they are considered as qualifying medical expenses, making them deductible. You will need to itemize deductions using Schedule A to claim a deduction for medical expenses.
Is Medicare tax federal or state?
Medicare taxes fund Medicare. Since Medicare has nothing to do with a particular state and accessible to everyone eligible in the United States regardless of residence, it’s a federal payroll tax.
Who is exempt from Medicare tax?
Generally, nonresident aliens who work in the United States are exempt from paying Social Security and Medicare taxes as long as their work is allowed by the USCIS. So, only nonresident aliens that are permitted to work don’t pay Medicare taxes.