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.