Medicare Tax
What is Medicare Tax?
The Medicare Tax funds the Medicare program, a health insurance program for the elderly and disabled. 1.45% of the employee's income is paid by the employer as Medicare tax, and 1.45% is paid by the employee. Unlike Social Security, there is no cap on the Medicare tax.
Dividend and interest income is not subject to Social Security or Medicare taxation.
Together, Social Security and Medicare taxes compose the Federal Insurance Contributions Act (FICA) tax. These taxes are based on income, but unlike the Federal income tax, they are set aside for their specific purposes.
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Federal Income Tax | Social Security Tax | Medicare Tax