Medicare Tax Calculator

What is Medicare Tax?

Medicare tax is a payroll tax that funds the Medicare insurance program in the United States. It is part of the Federal Insurance Contributions Act (FICA) taxes, along with Social Security tax. Medicare tax is paid by both employees and employers to provide health insurance for individuals who are 65 or older, or those with certain disabilities.

The Medicare Tax Formula

The Medicare tax consists of two parts:

1. Base Medicare tax: \[BaseTax = Income \times 1.45\%\]
2. Additional Medicare tax (for high-income earners): \[AdditionalTax = (Income - Threshold) \times 0.9\%\]

   Where the threshold is $200,000 for single filers and $250,000 for married filing jointly.

The total Medicare tax is the sum of these two components:

\[TotalTax = BaseTax + AdditionalTax\]

Step-by-Step Tax Calculation

1. Calculate the base Medicare tax by multiplying the total income by 1.45%.
2. If the income exceeds the threshold, calculate the additional Medicare tax on the amount above the threshold.
3. Sum the base tax and additional tax (if any) to get the total Medicare tax.
4. Calculate the effective tax rate by dividing the total tax by the income and multiplying by 100%.

Example Calculation

Let's calculate the Medicare tax for a single filer with an annual income of $220,000:

1. Base Medicare tax: \($220,000 \times 1.45\% = $3,190\)
2. Additional Medicare tax: \(($220,000 - $200,000) \times 0.9\% = $180\)
3. Total Medicare tax: \($3,190 + $180 = $3,370\)
4. Effective tax rate: \(\frac{$3,370}{$220,000} \times 100\% = 1.53\%\)

Visual Representation

The blue portion of the bar represents the effective Medicare tax rate (1.53%) for the given income.