The Additional Medicare Tax
What You Need to Know
The Additional Medicare Tax was implemented in late 2013 as part of the Affordable Care Act (ACA). Starting in tax year 2013, you may be required to pay an Additional Medicare Tax (on top of the ‘regular’ Medicare tax) if your income exceeds certain thresholds.
Here’s what you should know about the Additional Medicare Tax and how it can affect your return.
Who Is Subject to Additional Medicare Tax?
The Additional Medicare Tax is 0.9% and it applies to wages, self-employment income, and railroad retirement (RRTA) compensation that exceed a certain threshold. You are liable for Additional Medicare Tax if your income exceeds the following threshold amount for your filing status:
• Single – $200,000
• Married Filing Separately – $125,000
• Married Filing Jointly – $250,000
• Head of Household – $200,000
• Qualifying Widow(er) with Dependent Child – $200,000
All wages that are subject to Medicare Tax are also subject to the Additional Medicare Tax. You must combine your wages and self-employment income to determine whether you exceed the threshold. Any tips you earn are subject to this tax if they exceed your applicable threshold when combined with your other wages. If you have RRTA compensation, it must be compared separately to the income threshold.
The Additional Medicare Tax also applies to the value of noncash taxable wages, such as fringe benefits. However, you should not consider a loss from self-employment for the purposes of this tax. For more information, see the Instructions for Form 8969 (Additional Medicare Tax).
Note that there are no special rules for nonresident aliens or U.S. citizens living overseas.
How to Report and Pay Additional Medicare Tax
If you earn over $200,000 from an employer in a calendar year, your employer must withhold Additional Medicare Tax from your wages – regardless of your filing status or your income from other sources. If you will owe more tax than the amount withheld, you should make estimated tax payments or increase your tax withholding on Form W-4.
Use Form 8959 (Additional Medicare Tax) to determine the amount of Additional Medicare Tax that you owe and to report any tax withheld by your employer. If you owe Additional Medicare Tax, file Form 8959 with your income tax return.
For more information, see “Questions and Answers for the Additional Medicare Tax” on the IRS website.