If you are an employee who receives a W-2 form from your employer each year, you are paying into the federal Medicare system. This program helps ensure that elderly and disabled Americans can cover the rising cost of health care. This deduction is automatic and will appear on every pay stub you get from your employer.
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How Medicare Is Funded
Medicare is funded by two sources. You and your employer share the burden of this federal program. Each party will submit 1.45 percent of your income each paycheck into the system. The total cost of Medicare is 2.9 percent of your allowable taxable income. If you are self-employed or your employer does not withhold taxes from your check, you will be responsible for the full 2.9 percent due to the federal government.
No Limits on Medicare Payments
There is not a set maximum income to pay into Medicare. Essentially, the government collects 2.9 percent of all income in America to pay for this program. This is a necessity because every American is eligible when he meets certain age and/or disability requirements.
Yearly Medicare Cost
To calculate how much you and your family will pay into Medicare each paycheck, take your estimated weekly/bi-weekly/monthly pay and multiply it by .0145. If you make $1,000 per week, you will be paying $14.50 each week in Medicare taxes. Your employer will also be paying an equal amount.
You most likely file some sort of quarterly or semi-annual filings to ensure that you are up-to-date on all taxes due to the IRS, so as not to get penalized at the end of the year. You will want to ensure that whoever processes your tax paperwork determines how much your taxable income is and makes the necessary 2.9% payment to the government for Medicare.