Medicare Tax

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Along with Social Security tax, Medicare tax is part of FICA. It helps pay for the hospital insurance portion of Medicare. The Medicare tax rate for employees is lower than the Social Security tax rate, and since 1990 it has been fixed at 1.45 percent. There is no upper limit on wages that are liable for the Medicare tax. In other words, it does not matter how much you earn you will typically always pay Medicare tax. Social security tax, however, is capped at certain wage levels. Medicare tax and social security tax are usually listed separately on your paycheck. See also Medicaid, Payroll Tax and Social Security.