Medicare Tax

Medicare tax is a payroll tax that funds the Medicare program, which provides health insurance to individuals aged 65 and older, and to some younger individuals with disabilities. In the U.S., both employees and employers are required to contribute to the Medicare tax. The tax rate is typically 1.45% of an employee’s gross wages for both the employee and the employer, for a total of 2.9%. High-income earners may be subject to an additional 0.9% Medicare tax on wages exceeding a certain threshold, as defined by the IRS. Unlike Social Security tax, there is no wage cap for Medicare tax, meaning all earnings are subject to this tax.