What Does Medicare Wages Mean?

The term refers to the part of a person's income or salary which is subject to the so-called ‘Medicare tax.’ The amount paid for such a tax constitutes one’s contribution to the so-called ‘Medicare’, which is a health insurance scheme common in the U.S. This insurance plan provides coverage for those people who are either over 65, or who meet one of the special criteria mentioned in the legal documents.

Medicare Wages Explained

For instance, in 2008, an employer in the U.S. must have withheld 1.45% of his or her employee's salaries as a contribution for Medicare tax. If one is to calculate the total contribution of the employer and the employee to the Medicare tax, it will add up to 2.9% compensation.

In case of the Medicare tax, such thing as a maximum salary base simply does not exist, although such a base is common for the Social Security tax for instance. But Medicare tax must be paid for each amount of compensation by both employers and employees, without any limitation.

It is worth mentioning that usually tips and other bonuses are exempt from the Medicare tax, so these do not constitute a part of the medicare wage.