What is FED MED/EE Tax?

Written by J. Hirby and Fact Checked by The Law Dictionary Staff  

One withholding employees see listed on their earnings statements is the Fed MED/EE Tax. This stands for Federal Medicare/Employer-Employee and is a tax that funds the Medicare Health Insurance program. This program provides medical care, medical treatments, physician prescribed medications, and hospital visits for individuals with work related disabilities and those individuals who are 65 years old or older.

<strong>WHO PAYS THE FED MED/EE TAX</strong>
Every person, with a few rare exceptions, who earns a paycheck, will have this payroll tax deducted from the gross salary earned, but it is not part of the Federal taxes paid for income tax purposes. An example of an exception to this payroll tax is when both the employer and employee are members of a religion that is opposed to insurance based on their divinity’s doctrine. If someone thinks that they may have justification for an exception to paying this tax, or already qualify for an exception to paying this tax, can take with an IRS agent or consult a tax advisor for guidance. All other wage earners are required to pay this tax.

<strong>RATE OF TAX AND EARNINGS LIMIT ON TAX</strong>
The Fed MED/EE Tax rate is 2.9 percent of gross income. The employee pays 1.45 percent and the employer pays a matching 1.45 percent. Self employed individuals will pay the entire 2.9 percent. Unlike the social security tax which has an income limit on how much tax is paid, there is no limit on the Fed MED/EE tax. This tax is paid on everyone’s earnings, no matter how small or how large the annual amount.

<strong>NOT AN INDIVIDUAL INCOME TAX DEDUCTION</strong>
Individual tax payers cannot list the Fed MED/EE tax as an expense on their income tax forms. Only Federal income tax can be listed as an expense for IRS purposes. Self employed individuals who pay both the employer’s and employee’s share of the tax can list the employer’s 1.45 percent portion of the tax as a business expense on their company’s income tax, but not the employee’s 1.45 percent portion on their personal tax forms. Employers can find the guidelines on Fed MED/EE tax calculations at the IRS website: www.irs.gov/pub/irs-pdf/p15.pdf .

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