Medicare Taxes and Medicare Surcharge

Today's topic will be Medicare Taxes and Penalties that are imposed on high income earners, employees, and those that do not enroll in a Part D Plan when they are first eligible. Also we will mention briefly the new Medicare Tax that "Obama-care" has implemented on those with higher income.

Medicare Taxes - High Income Earners

Medicare has implemented a penalty or additional tax on individuals who are considered to be in the high income bracket. There are different levels that can be found on this link (Medicare Part B and Part D - Medicare Tax), but in general if you are making over $85,000 and are single or $170,000 married you will be paying additional Medicare taxes on both Part B and Part D.

These additional penalties start at $52 per month ($40 Part B and $11.60 Part D) and go up to $285 per month ($219.80 Part B and $66.40 Part D) depending on your income. You can understand why some business owners may rather stay on their group health plan than get on Medicare due to the penalties that they will receive. Ex: if a business owner is paying $400 per month for his group health plan, but to get off it would cost him $100 for Part B $200 in additional penalties, $30 for a Part D drug plan, and $110 for a Medicare Supplement he may be better off staying on the group plan. This takes more analysis than what was just shown but this is a basic example.

Medicare Taxes - Obama Care

Under the Affordable Care Act an additional Medicare tax was implemented on high income earners. The rate assigned for this tax is 0.9%. All wages currently subject to Medicare Tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. This includes Railroad Retirement Tax Act Compensation.

An employer is required to hold this money out of an employee's pay. The employer is not required to notify the employee of this additional tax withholding There is not an employer match for these funds and the employer is only required to withhold these funds after the employee reaches the $200,000 mark.

Part D Penalty

Medicare Taxes would also include a Part B and Part D penalty for not enrolling when first eligible. These penalty or taxes get larger and larger each month that you wait on making a decision to join Medicare, unless you have had creditable coverage with another plan. This would be referred to as a Special Election Period.

For more information on Medicare Insurance and what penalties you may receive contact MWG Senior Services for all your Medicare insurance needs.