Medicare
Federal health insurance program funded by payroll taxes.
Medicare is a federal health insurance program primarily for people 65 and older, funded by a 2.9% payroll tax split equally between employer and employee (1.45% each). An additional 0.9% Medicare surtax applies to employee wages exceeding $200,000. Unlike Social Security, there is no wage cap for Medicare taxes—all earned income is subject.
Example
An employee earning $250,000 pays 1.45% Medicare tax on the first $200,000 ($2,900) and 2.35% on the remaining $50,000 ($1,175) due to the additional Medicare tax, totaling $4,075.
Why It Matters for Your Business
Medicare tax is a mandatory employer cost with no upper limit on wages, and the additional Medicare tax on high earners requires proper withholding.
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