The Medicare tax, frequently referred to as the “hospital insurance tax,” represents a federal payroll tax that contributes to a section of the Medicare system funding. Similar to the Social Security tax, the Medicare tax is deducted from an employee’s wages or paid via a tax on self-employment income.
Supporting Medicare’s Part A, which pertains to hospital insurance, this tax assists those aged 65 and above, along with certain individuals with disabilities. It encompasses services like hospital stays, care in a hospice environment, skilled nursing facility care, and selected home healthcare services.
– Medicare levies support the costs associated with hospital stays, hospice services, and skilled nursing facility care for seniors and those with disabilities.
– As of 2022, the rate imposed for Medicare taxes stands at 2.9%, evenly divided between the employee and their employer.
– Entrepreneurs who are self-employed bear the responsibility for both shares of the Medicare levy, albeit only on 92.35% of their business profits.
All individuals employed within the United States are obligated to contribute to Medicare taxes. Mandated by the Federal Insurance Contributions Act (FICA), employers are required to deduct both Medicare and Social Security contributions directly from their workers’ earnings.
