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Committee explains proposed Medicare tax

The House Ways and Means Committee Saturday made public how the proposed changes in health care legislation would affect Medicare taxes.

Currently, the Medicare payroll tax is 2.9 percent on earned income - 1.45 percent paid by employers and 1.45 percent paid by employees. Under the proposal the House is scheduled to vote on Sunday, employees who earn more than certain earning thresholds would pay tax at a rate of 2.35 percent. The Medicare tax paid by employers would not increase.

For all joint filers making less than $250,000, there would be no change, and for single filers making less than $200,000, there would be no change.

For all joint returns with $250,000 or more in earned income, or for individuals with income over $200,000, there would be an additional tax of 0.9 percent on the employee portion of the Medicare tax on income in excess of $250,000 for joint filers and $200,000 for individuals. For a couple filing jointly making $300,000, that would mean an increase of $450, for a total tax of $4,800 annually. For a single filer making $300,000, that would mean a $900 increase, for a total tax of $5,250 annually.

The legislation also would add a tax to investment income. For joint filers earning $250,000 or more, and individuals earning $200,000 or more, there's an additional tax of 3.8 percent on investment income, including dividends, interest, royalties and capital gains. Compiled by Keith Herbert


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