Medicare Wages and Tips is a box on the IRS Form W-2 that reports the total taxable wages, tips, and other compensation subject to Medicare tax withholding during the calendar year. This figure includes salary, bonuses, commissions, and taxable benefits but excludes amounts not subject to Medicare tax. Employers use this amount to calculate Medicare tax owed by both employees and employers.
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Key Facts
- Location on W-2: Reported in Box 5 of Form W-2.
- Includes: Wages, tips, bonuses, and other compensation subject to Medicare tax.
- Excludes: Amounts exempt from Medicare tax, like some pre-tax contributions or benefits.
- Medicare Tax Rate: Medicare tax is generally 1.45% on all wages with no wage limit; higher earners may pay an additional 0.9%.
- Purpose: Used to calculate Medicare taxes withheld from employee paychecks.
1. What are Medicare wages and tips on a W-2?
The total amount of income subject to Medicare tax withholding reported by the employer.
2. Why might Medicare wages be different from regular wages?
Because some pre-tax deductions reduce taxable wages for Medicare tax purposes.
3. What is the Medicare tax rate?
1.45% for both employees and employers, plus an additional 0.9% on wages over a certain threshold.
4. Are tips included in Medicare wages?
Yes, tips reported to the employer are included and subject to Medicare tax.
5. How is Medicare wages different from Social Security wages?
Medicare wages have no income limit, while Social Security wages are capped at a yearly maximum.
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