DEFINITION of 'Medicare Wages'

An employee's earnings that are subject to a U.S. payroll tax known as the "Medicare tax." Similar to the other U.S. payroll tax - Social Security - the Medicare tax is used to fund the government's Medicare program, which provides subsidized healthcare and hospital insurance benefits to retirees and the disabled. Medicare and Social Security taxes are levied on both employees and employers.

BREAKING DOWN 'Medicare Wages'

The employee's share of the Medicare tax is a percentage and is withheld from his or her income. For example the medicare tax was 1.45% of wages in 2011 and other employment compensation. The employer would contribute a matching 1.45%, for a total Medicare tax of 2.9%.

There is currently no upper limit on the amount of earnings subject to the Medicare tax, this limit having been removed with effect from December 31, 1993.

The rate can change and there can be additions. For example, as of 2013 an additional 0.9% hospital insurance tax is assessed on earned income exceeding $200,000 for individuals and $250,000 for married couples filing jointly, bringing their Medicare tax to 3.8%.

RELATED TERMS
  1. Medicare Part B Premiums

    A monthly fee that Medicare participants pay for medical insurance ...
  2. State Health Insurance Assistance ...

    State Health Insurance Assistance Programs (SHIP) offer free ...
  3. Medicare Supplementary Medical ...

    Health insurance sold by private insurance companies meant to ...
  4. Medicare Part D

    A prescription drug benefit program that was created through ...
  5. Guaranteed Issue Rights

    A right afforded to individuals insured under Medicare that requires ...
  6. Medigap

    Also called Medicare Supplement Insurance, Medigap is health ...
Related Articles
  1. Retirement

    Medicare Open Enrollment Ends Dec. 7

    Avoid these 4 mistakes during the Medicare Open Enrollment period (Oct. 15 to Dec. 7).
  2. Managing Wealth

    Have Medicare? Which Employer Health Plan to Get

    Over 65 and still working? You're eligible to register for Medicare, but should you also opt for employer health insurance, if offered – and which plan?
  3. Insurance

    Should Retirees Worry About Medicare Under Trump?

    With the Affordable Care Act on the chopping block, there are rumbles that Medicare could be next.
  4. Insurance

    7 Common Medicare Mistakes and How to Avoid Them

    Medicare is confusing to many people, so if you're eligible, make sure you understand the pitfalls that come with making decisions during open enrollment.
  5. Managing Wealth

    Planning for Healthcare

    Planning how to pay for healthcare during retirement is a must—and the earlier you do it, the better. Medicare often fall short, so here are your options.
  6. Insurance

    Choosing Medicare Advantage? Read This First

    A new study finds disturbing differences in the hospital networks some Medicare Advantage plans provide. Check before you sign up.
  7. Financial Advisor

    How to Help Clients Navigate Medicare Enrollment

    Here's how financial advisors can be an essential guide in helping clients navigate the murky Medicare sign up waters.
  8. Managing Wealth

    How to Choose the Best Medicare Advantage Plan

    Medicare Advantage offers an alternative to Medicare and Medigap. Here’s what you need to know to choose the best plan.
  9. Financial Advisor

    How to Help Clients Navigate Medicare Enrollment

    Here's how to help clients navigate the maze of Medicare enrollment.
RELATED FAQS
  1. Can I get dental insurance with Medicare?

    Learn about Medicare and how it does not offer dental insurance and only covers specific dental procedures under certain ... Read Answer >>
  2. What effect has the sustainable growth rate had on Medicare disbursements?

    Read about the impact of the Medicare sustainable growth rate mechanism on rising Medicare costs and physician reimbursements ... Read Answer >>
  3. How does the role of Medicare/Medicaid affect the drugs sector in the U.S.? (UNH, ...

    Read about the impact of Medicare and Medicaid on the drugs sector in the United States and how some doctors get rich by ... Read Answer >>
Hot Definitions
  1. Profitability Index

    An index that attempts to identify the relationship between the costs and benefits of a proposed project through the use ...
  2. Restricted Stock Unit

    Compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock ...
  3. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  6. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
Trading Center