Medicare wages is the portion of earnings that is subject to the United States Medicare tax. Medicare tax does not include tips or bonuses. Most of the time, these taxes are taken out of a person check before they receive their earnings. Not all individuals or income is subject to Medicare tax. There are ways to reduce Medicare wages an offset taxes. Medicare wages is used to refer to a United States Program, but there are other countries with similar tax program requirements.
The average American worker has three major taxes deducted from their earnings: federal, social security and medicare, and in some states, state taxes. Medicare taxes are used to support the medicare program. The medicare program is a government program for senior citizens and people with disabilities. Medicare taxes are deducted from a person’s pay check, sent directly to the government, and then to those who are apart of the Medicare program. If a person is self-employed or works for an employer that does not deduct Medicare tax they are required to send payment directly to the government.
Most employees are issued W2 forms with yearly taxable wages, this includes federal, social security and medicare taxes. Generally, this form is used for filing taxes. However, those who are self-employed or who do not have medicare wages deducted from their earnings must keep track of these wages themselves.
Not all income requires medicare tax deduction. For example, small tips and non-cash income, like bus pass allowances, is not counted towards Medicare wages. Individuals making less than an amount set by the state is not liable for paying medicare wages.