Medicare Withholding - Calculating Your Taxes

By: Lewis Mark
Published: Wednesday, October 10 2018
Last Updated: 4 years ago

Everyone has a love-hate relationship with taxes, but most are in agreement it leans more towards hate. On the one hand, taxes are necessary for funding public programs like education and public safety. On the other hand, there is a good chunk of our hard earned money that goes to things like researching whether or not gold equipment is effective in space (true story). That being said, the next time you look at your paycheck, you can be certain your money will be going to at least one worthwhile public program, Medicare.

What Is Medicare Withholding?

Medicare withholding also called the Medicare tax, is one of the two Federal Insurance Contribution Act (FICA) taxes. Next time you receive your paycheck, you’ll notice the two FICA taxes clearly deducted from your income. Between the two, you should expect to pay a 6.2% Social Security Tax, and a 1.44% Medicare tax.

What Is The Medicare Tax For?

As you may be able to guess from the name, your Medicare Withholdings is used to fund the federally run senior healthcare program known as Medicare. Nobody likes to see deductions on their paychecks, but it’s one of the most important and beneficial taxes that we currently pay.

Medicare is one of the only healthcare programs available for seniors in the US. It’s comprehensive, relatively inexpensive, and takes care of those who may not have access to affordable health insurance otherwise. Between the Social Security and Medicare FICA taxes, you’ll be able to have some peace of mind in your senior years knowing that others are helping take care of you as you did in your younger years.

Changes Under The Affordable Care Act

When the Affordable Care Act passed, it changed the landscape of healthcare in the US. While the focus was on creating health insurance marketplaces for families and individuals, it also created a ripple effect in Medicare as well.

In 2013, the new Additional Medicare Tax went into effect, though most people didn’t feel the effects. The Additional Medicare Tax is a .9% rate but only applies to people if they fall into a certain income bracket.

Additional Medicare Tax Rates

The majority of your wages will be included in your income filing. Meaning, regardless of where you money comes from, if your income falls into any of the below brackets, you can expect to pay following Additional Medicare Tax Rates:

<table> <tr> <th>Filing Status</th> <th>Threshold Amount</th> </tr> <tr> <td>Single</td> <td>$200,000</td> </tr> <tr> <td>Head of household with qualifying person</td> <td>$200,000</td> </tr> <tr> <td>Qualifying widow(er) with dependent child</td> <td>$200,000</td> </tr> <tr> <td>Married filing jointly</td> <td>$250,000</td> </tr> <tr> <td>Married filing separately</td> <td>$125,000</td> </tr>

How To Calculate Your Federal Tax Withholding

As mentioned earlier, you’ll be able to calculate how much your Medicare Tax Withholding will be. All you have to do is multiply your taxable wages by the following amounts:

  • Medicare Tax Withholding = 1.45%
  • Social Security Tax = 6.2%

Although keep in mind, if you make too much money, you will also be responsible for the Additional Medicare Tax, which is .9%.