Virginia Contractor General Practice Test

What is the total Medicare tax rate for employees?

1. 2.5%

2. 2.9%

3. 3.5%

4. 4%

The correct answer is: 2.9%

The total Medicare tax rate for employees is 2.9%. This rate is comprised of two parts: 1.45% that is paid by the employee and 1.45% that is matched by the employer. Unlike Social Security taxes, there is no income limit for Medicare tax, which means that all of an employee's wages are subject to this tax regardless of the amount earned. It is also worth noting that high-income earners may be subject to an additional Medicare tax of 0.9% on wages that exceed certain thresholds, but this is separate from the standard Medicare tax rate. Understanding the structure of the Medicare tax is essential for contractors and business owners as they calculate payroll and ensure compliance with federal tax regulations.