What are Medicare Taxes (FICA)

Medicare taxes are contributions from employers and employees into the Medicare Fund.

Medicare is an insurance program for people age 65 or older; people under age 65 with certain disabilities; and people of all ages with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant).  Medicare has two parts: Part A (Hospital insurance) and Part B (Medical Insurance).  Most people don't have to pay for Part A, but most do have to pay for Part B.

Social Security and Medicare Taxes are referred to as FICA (Federal Insurance Contributions Act).

Who Is Required To Pay Medicare Taxes

Medicare tax is paid by both the employee and the employer into the Medicare Fund.

What Is The Medicare Tax Rate

The total Medicare Tax rate is 2.9%.  The employee pays 1.45% and the employer also pay 1.45%.    

There is no wage base (income) limit for Medicare taxes. 

Self Employed:

If you are self employed you are required to pay both the employee and employer Medicare taxes.  Your effective rate is 2.9%. 

Additional Medicare Tax: 0.9% on wages & Self-employed income over:

- Married Filing Jointly:  $250,000
- Single or Head of Household or Qualifying Widdow(er):  $200,000
- Married Filing Separately:  $125,000

Reporting and Paying Medicare Taxes

The employers are required to withhold their employees' Medicare taxes and pay them to the IRS.

Medicare taxes are normally paid to the IRS on a quarterly basis using Form 941.  However, the IRS allows smaller companies to pay on an annual basis using Form 944.  Visit the IRS website to learn more about collecting and paying the Medicare tax.

Medicare taxes are withheld by the employer  based on the W-4 form that the employee is required to complete.   The employee can use the IRS Withholding Calculator to calculate how much Medicare taxes will be taken out of his/her paycheck.

The Social Security Administration (SSA) manages Social Security.  Visit their website to learn more about the Social Security tax.

Download and read the IRS Employer Tax Guide (Publication 15), or use the web based version of Publication 15.

IRS Publication 505 (Tax withholding and estimated tax)

Resources

Learn more about Medicare

FITW/FICA (Federal Income Tax Withholding/Federal Insurance Contributions Act)

IRS Guidelines Governing Tax Deposits

Federal Tax Withholding and Estimated Tax Guidelines

IRS Withholding Calculator