Underwriting is the process assessing risk of issuing insurance. Undewriters evaluate applications,
What Is Medicare?
Medicare is a national system that provides healthcare for eligible residents in the United States. Recipients are typically age 65 or older, although younger people may qualify if they have certain diseases or disabilities. Medicare coverage includes a broad range of inpatient and outpatient services and prescription drug plans. While the services provided are extensive, Medicare does not pay them in full. For any medical bills you incur, Medicare typically only pays up to 80%. In addition, the majority of Medicare recipients must pay a premium.
What Are Medicare Taxes?
Medicare taxes help fund Medicare. The Medicare taxes and Social Security tax are mandated by the Federal Insurance Contributions Act (FICA). FICA taxes are deducted from your wages and other income.
Who Pays the Medicare Tax?
Any employee or business in the United States will contribute to the Medicare tax. This includes people who are self-employed and non-residents. The tax applies to all eligible income. Eligible income includes your wages, tips, and bonuses. Some fringe benefits are subject to the tax as well, such as paid time off or access to a company car for personal use.
What Is the Medicare Tax Rate?
The Medicare tax rate for 2019 is 1.45% of your income, with your employer paying a matching 1.45%. Combined with the 12.4% tax rate for Social Security, the total FICA tax rate is 15.3%.
Unlike the Social Security tax, which has a cap on the amount you can be taxed each year, there is no limit to the Medicare tax. In fact, if your income is above a certain level, you may have to pay the Additional Medicare Tax.
You may be responsible for Additional Medicare Taxes if any of the following situations apply to you.
- Single, and your filed income is $200,000 or above
- Married, filing independently, and your income is $125,000 or above
- Married, filing jointly, and your combined incomes are $250,000 or above
If you fall into one of those categories, you are required to pay an additional .9%. Your employer, however, is not responsible for the extra cost.
Do I Have to Pay the Medicare Tax on My Investments?
Some, but not all earnings from investments will be subject to the Medicare tax.
A few of the types of investments that are usually subject to the tax are:
- Rental income
- Net capital gains from the sales of investments
Nontaxable investments and benefits include:
- Withdrawals made from a retirement plan such as a Traditional IRA, Roth IRA, or 401(k)
- Veteran’s benefits
- Social Security benefits
Speak With An Expert
Getting onto Medicare can be an arduous process. You are not only responsible for learning how your coverage will work, but you must also adhere to a strict timeframe, and determine what kind of supplemental coverage you need. You can prepare yourself by working with an expert. A GoMedigap agent will educate you on Medicare, and guide you through the process. To see how we can help, give us a call at (866)894-3258.