What Is the MED/EE Deduction on My Paycheck?
Gain clarity on the "MED/EE" deduction seen on your paycheck. Understand this common payroll item and its role in your personal finances.
Many individuals notice various deductions on their pay stubs without fully understanding their purpose. “MED/EE” is a common abbreviation that often raises questions. This article clarifies what “MED/EE” stands for and explains why it appears as a deduction.
Understanding the Medicare Employee Contribution
“MED/EE” represents the employee’s portion of the Medicare tax, a mandatory federal payroll tax. This tax contributes to Medicare, a federal health insurance program for individuals aged 65 or older, certain younger people with disabilities, and those with End-Stage Renal Disease (ESRD).
The “MED/EE” deduction funds Medicare Part A, also known as Hospital Insurance (HI). This program helps cover costs for inpatient hospital care, skilled nursing facility care, hospice care, and some home health services. Employers also contribute to this fund.
Calculating Your Medicare Tax
The standard Medicare tax rate for employees is 1.45% of their gross wages. All covered wages an individual earns are subject to this tax, as there is no wage base limit.
For higher earners, an Additional Medicare Tax of 0.9% applies to wages above certain thresholds. These thresholds are $200,000 for single filers, $250,000 for married individuals filing jointly, and $125,000 for married individuals filing separately. This additional tax is levied only on the portion of wages exceeding these amounts. For example, a single filer earning $220,000 would pay the standard 1.45% on the full $220,000 and an additional 0.9% on $20,000 (the amount over $200,000).
Employers withhold this Additional Medicare Tax once an employee’s wages surpass $200,000 in a calendar year, regardless of the employee’s filing status. An employee might owe more or less than the amount withheld depending on their filing status and total income. Adjustments can be made when filing their annual income tax return.
Medicare Tax Versus Other Paycheck Deductions
The “MED/EE” deduction is one of several taxes that reduce an employee’s gross pay. It is often grouped with Social Security tax under the Federal Insurance Contributions Act (FICA). FICA taxes include Social Security taxes (Old-Age, Survivors, and Disability Insurance or OASDI) and Medicare (Hospital Insurance) taxes.
While both are FICA taxes, Social Security and Medicare taxes have key differences. Social Security tax, which is 6.2% for employees, has a wage base limit. Its purpose is to fund retirement, disability, and survivor benefits.
In contrast, Medicare tax has no wage base limit and provides health insurance for eligible individuals. Other common paycheck deductions include federal income tax, state income tax (where applicable), and pre-tax deductions for benefits like 401(k) contributions or health insurance premiums. Each deduction serves a different purpose and is calculated based on specific rules.