Understanding Medicare Taxes

If you’ve been working for a while, you’ve probably noticed that some money is automatically

deducted from your regular paycheck. That money, however, doesn’t just disappear into thin air. At least a portion of it goes to fund the Medicare program, but what is this program, and why must you pay into it?  

What is Medicare?  

Medicare is a federal program that collects money from American taxpayers. This money is then used to help pay for the health care expenses of elderly individuals who are at a financial disadvantage. Sadly, there are many such people living in America today, so many that tax dollars alone aren’t enough to adequately care for them. That’s why other funding methods exist, such as special premiums and government revenue. And, while it may not feel good to see money deducted from your paycheck, you should feel glad that the money is going toward hospital expenses and medical costs for the individuals who need it most.  

Why Was I Taxed More Than Usual?  

Sometimes, taxpayers are surprised to find that they are paying more Medicare taxes than usual. When this happens, it is due to the Additional Medicare Tax, which has been in place since 2013, though the income thresholds that determine who is subject to the tax do change.  

As of 2020, any single filer earning over $200,000 per year will face this tax. Married filers must earn more than $250,000 a year to be subject. Unfortunately, though, if you’re married but filing separately, you’ll face this tax if you earn over $125,000 annually. Ultimately, most people probably wouldn’t say that they enjoy paying Medicare taxes. But, when you see the good that Medicare does, it’s hard not to feel like you’re making a difference through your tax dollars.  

However, if Medicare and other taxes are leaving you without enough money to live on, then you may need to look to other options, such as having your returns professionally prepared, taking advantage of credits and deductions, or finding other ways to legally cut your tax bill. After all, helping others via Medicare and various programs is great, but you have to help yourself as well!