Medicare Tax
A payroll tax that funds Medicare, withheld from wages and self-employment income, with an extra surtax on high earners.
The Medicare tax is a payroll tax that funds Medicare's hospital insurance. Employees and employers each pay a share on wages, and self-employed people pay both halves through self-employment tax. Unlike the Social Security portion, there's no wage cap — Medicare tax applies to all earned income.
Higher earners pay an Additional Medicare Tax on earned income above certain thresholds, and a related Net Investment Income Tax can apply to investment income for high earners. These surtaxes are a reason high-income households watch the line between earned and investment income carefully.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.