Medicare Tax Rate 2019 - What You’ll End Up Paying

By: Meredith Miller
Published: Thursday, January 10 2019
Last Updated: 3 years ago

Curious as to what the Medicare tax rate for 2019 will be? There were some new pieces of legislation introduced in 2018 that you probably noticed, and those same laws will likely continue that trend into this year.

It wasn’t just the Medicare tax rate that will be changing this year either, the Social Security Wage Base (SSWB) may be seeing some changes as well. Not quite sure what that is? Essentially, the SSWB determines the levels for different income brackets, with higher taxes hitting higher earners. These changes may have a greater impact than you may realize and will affect payroll taxes and your pockets as well. Here’s what you need to know.

What Is The Medicare Tax Rate For 2019?

You might have seen the Federal Insurance Contributions Act (FICA) term listed on your paycheque, and wondered what exactly you were paying for. Basically, the FICA deduction is the total of both the Medicare and Social Security tax. The Social Security Act of 1935 established this FICA tax.

From time to time, the United States Congress will review the entitlements programs to determine if any modifications should be made. Otherwise, the Social Security Administration (SSA) is in charge of day-to-day management. Since 1990, withholding taxes have been divided up at the following rates:

  • Employer Social Security Tax Is 6.2%
  • Employee Social Security Tax Is 6.2%
  • Employer Medicare Tax Is 1.45%
  • Employee Medicare Tax Is 1.45%

Add these all together and you have a total Federal Insurance Contributions Act tax of 15.3%. Fortunately, these taxes are equally distributed between employer and employee.

Is It An Increase From The 2018 Rate?

The basic Medicare tax rate in 2019 hasn't really budged. On the other hand, in 2018, the Affordable Care Act’s Additional Medicare Tax (AMT) increase of 0.9% for higher wage earners kicked in. Earned income that might be subject to this AMT included wages and compensation above the following thresholds:

  • Married Filing Jointly Is $250,000
  • Married Filing Separately Is $125,000
  • Single Is $200,000

While the Medicare tax rate will remain relatively unchanged in 2019, the Social Security Wage Base will continue to rise.

What’s The Social Security Wage Base For 2019?

Every year, the Social Security Wage Base (SSWB) is adjusted for inflation. The reason why this matters for the Medicare tax rate 2019 is due to the Obamacare AMT. This determines who qualifies as a high-income earner and is subject to AMT. The Social Security Wage Base 2019 will be $132,900 for self-employed or employees Furthermore, wages above $200,000 will be subject to the Obamacare 0.9% AMT.

How Much Of An Increase Is It From 2018?

The Social Security Wage Base 2019 is $4,500 higher than the Social Security Wage Base 2018 of $128,400. This is a 3.5% increase over the previous year. This is significantly higher than the 1% increase from 2017 to 2018.

Who Imposes These Taxes?

The United States Congress has control over the purse. This means that the House of Representatives and Senate determined the Medicare tax rate in 2019. They agreed upon the rates to arrive at an acceptable joint bill. After Congress passes a bill, the president must sign it into law. Thereafter, the tax rates are pretty much set until a new law changes the rate. As a result, many of these rates were determined years ago.

Who Has To Pay Them?

Everyone who works or runs a business in the US must pay the Federal Insurance Contributions Act taxes. All wages, tips, and some Railroad Retirement Tax Act (RRTA) benefits are subject to the taxes, along with self-employed earnings that are below a certain amount might also be subject to these taxes. There is no minimum income threshold, and income earned outside the United States might also be subject to taxation.

FICA taxes are automatically deducted from employee pay cheques, and high earning employees must pay the higher Medicare tax rate 2019 as part of provisions set under Obamacare. The AMT applies to high-income employees but doesn’t apply to the employer. Where business owners will be impacted is their quarterly payroll withholding taxes filings. Business owners must file payroll taxes, which include the additional 0.9% tax on their high-income earners.

They must use Form 941 and file these taxes quarterly within one month after April, July, October, and January. The self-employed do not file quarterly payroll taxes because they do not have employees. If they are high earners, then they would need to pay the AMT on their annual returns.