Medicare tax is the federal tax applied to employees who work inside the United States. This tax helps to pay for the costs of the Medicare program and allows every citizen who has paid Medicare tax or is a spouse of a person who has paid Medicare tax to receive Medicare Part A coverage for free at age 65.
Medicare and Personal Income
Income is not part of the eligibility requirements for having Medicare. When you work, you have to pay federal taxes that are deducted from your paycheck. One of the taxes withheld from your wage is the Medicare tax. All employees and self-employed individuals in the United States must pay Medicare tax, regardless of income levels. This allows any person (or spouse of that person) who has paid Medicare tax to receive premium-free Medicare Part A coverage (hospital insurance). Medicare Part A has no income limit for enrollment, and every citizen, regardless of income, can either receive free coverage or buy it in case Medicare taxes have not been paid.
Part B and Part D Premiums
Even though income is not one of the requirements for Medicare eligibility, it does have an influence in the monthly premiums you pay for anything other than Part A Medicare coverage. Part A is the only Medicare coverage that is free. Any person who stays with Part B (medical insurance) coverage or who enrolls in Part C (Advantage Plans provided by private companies) and Part D (prescription drug plans) is required to pay monthly premiums. The Social Security office looks at your income level to decide how much you must pay in monthly premiums for Part B and Part D. Higher income means higher premiums.
Income and Premiums
If you enroll in Medicare Part B or Part D, you might need to pay higher premiums, depending upon your income. According to “Medicare and You,” as of 2011, if your filing status is married jointly and you earn more than $170,000 per year, you are required to pay higher premiums for your Part B coverage and your prescription drug plan (Part D). If your filing status is other than married jointly (single, married separately or head of household) and you earn more than $85,000 per year, you must also pay higher premiums for Part B and Part D.
Premium Amounts
As of 2011, the standard premium for Part B is $115.40 per month. The standard premium for Part D varies according to the plan. If you file a joint return and your income is between $170,000 and $214,000 or if you have another filing status and your income is between $85,000 and $107,000, you have to add $46.10 to your Part B premiums and $12 to Part D premiums. If you earn between $214,000 and $320,000 as a married couple filing jointly or between $107,000 and $160,000 as someone of another filing status, add $115.30 to your Part B premium and $31.10 to your Part D premium. If you earn between $320,000 and $428,000 for a married couple jointly filing or between $160,000 and $214,000 in any other case, add $184.50 to your Part B premium and $50.10 to Part D. If you make more than $428,000 for a married couple jointly filing or more than $214,000 for another filing status, add $253.70 to Part B and $69.10 to Part D.