The Medicare tax is a U.S. payroll tax that funds the U.S. government’s Medicare program. Medicare tax is one of two categories under the Federal Insurance Contributions Act (see FICA Tax), the other being social security tax. In 2020, the contribution rate for Medicare is 1.45% for employees which is matched by 1.45% for employers, or 2.9% total. In addition to the 1.45% Medicare tax withholding, individuals must withhold 0.9% of pay in excess of $200,000 within the calendar year ($250,000 for joint returns and $125,000 for married taxpayers filing separately). There are further stipulations for this tax as provided by the Internal Revenue Service (IRS), by visiting the IRS website under Topic No. 751. For further explanation of the Medicare tax, visit this website.
[Last updated in July of 2020 by the Wex Definitions Team]