Medicare Tax

Medicare Tax

Medicare Tax means:
the hospital insurance portion of the tax assessed on compensation and self-employment earnings under the Federal Insurance Contributions Act. Medicare tax is an amount paid by individuals during the period in which they earn wages for purposes of providing them with benefits when they retire. Medical benefits are made available to certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65. Medicare tax is also deducted from social security benefits. In 1993 the Medicare tax was 2.9% of earnings up to $135,000. After 1993, all wages and self-employ- ment income are subject to the 2.9% tax. Used to provide medical benefits for certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65. An employer is required to withhold half of the tax (1.45%) from employees' wages and also to make a matching contribution of the other half of the tax. Employer-withheld and matching taxes are deposited at regular intervals with the U.S. Internal Revenue Service. Self-employed individuals include the 2.9% tax with their quarterly estimated tax payments.

The portion of the Social Security tax – 1.45% for employees and 2.9% for self-employed taxpayers – that pays for Medicare. Although the part of the tax that pays for retirement benefits stops at $106,800 in 2010 and 2011, the Medicare portion applies to all wages and self-employment income.

Medicare Tax Issue

You may find information about Medicare Tax in this Tax Platform of the American Encyclopedia of Law.


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