Medicare Tax Law and Legal Definition
Medicare tax is used to provide medical benefits for certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65.
Social security and Medicare taxes, also known as FICA taxes, must be withheld from an employee's wages. For example, if the Medicare tax rate is 2.9% for the employee and the employer, the employer will withhold 1.45% of an employee's wages and pay a matching amount for Medicare tax. There is no wage base for the Medicare portion of the FICA tax. Both the employer and the employee continue to pay Medicare tax, no matter how much is earned.