A Medicare tax is basically a payroll tax which is applicable to the income earned by you & aids your health insurance after you enroll in a Medicare plan. This tax will be automatically subtracted from your monthly paycheck & will be calculated based on your earnings, which includes tips, wages, some benefits associated with RRTA, as well as self-employment earnings which go beyond a certain limit.
Medicare Tax: Who Pays for it?
Normally, all the employees who’re working in the United States need to pay this tax, irrespective of their status of residency or citizenship. In a few cases, you might need to pay your Medicare tax based on your income outside the country. In case you find that your Medicare tax is withheld from the paycheck, you must get in touch with your company in order to claim to a refund.
The rate of your Medicare tax is decided by IRS & might change from one person to another. For the year 2018, the FICA tax rate is set at 7.65 percent. This includes the Medicare tax of 1.45% percent as well as the Social Security tax of 6.2% percent.
People who’re self-employed might have to pay a higher rate as they’re accountable for paying the share of the employee as well as the portion which your company typically pays.
For more info, you can visit the official site at IRS.gov or get in touch with the Social Security to know the latest tax rate on self-employment by calling their customer help desk.
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Additional Medicare Tax:
All kinds of wages which presently come under Medicare tax might also come under Additional Medicare Tax. A person owes this tax on compensation, self-employment earnings & cumulative wages each time the final amount surpasses the filing status threshold.
Additional Medicare Tax: Who pays for it?
People must pay this tax if their individual salaries, self-employment earnings (combined remuneration if married & filing a joint return) and compensation surpass the below max amounts:
Married & filing separately ->> $125k
Married & filing jointly) ->> $250k