Additional Medicare Tax

The additional Medicare tax was issued by the Internal Revenue Service (IRS) on November 26, 2013. Additional Medicare tax doesn’t apply to everyone, only those whose income surpasses a specific threshold.

The additional Medicare tax applies to your wages, compensation, Railroad Retirement Tax Act (RRTA) compensation or self-employment income. Gratuity tips you may receive at work should also be accounted for.

Who Pays for the Additional Medicare Tax?

If you’re filing single, you’ll be responsible for paying the additional Medicare tax if your income exceeds $200,000.

If you’re married, there are two different threshold limits. The threshold fluctuates depending on if you file taxes jointly or separately.

If you’re married and filing separately — you’re responsible for paying the additional Medicare tax if your income threshold is above $125,000. If you’re married and filing jointly — the income threshold increases to $250,000.

There are two other income thresholds for the additional Medicare tax, depending on if you are a widow or widower, or head of a household.

If you’re a widow or widower with a dependent child and your income threshold exceeds $200,000, you must pay the additional Medicare tax.

If you’re head of a household and responsible for filing the taxes, you’ll be responsible for paying the additional Medicare tax if your income is above $200,000.

The way you get taxed for the additional Medicare tax depends on if you are filing jointly or separately. The IRS assumes if you file jointly, you will both be making a higher income, therefore, there is a higher threshold.

Note that the additional Medicare tax is on top of the standard Medicare tax, which applies to everyone. Standard Medicare tax is 1.45% — or 2.9% if you are self-employed. Unlike the additional Medicare tax, there is no base limit on wage, so all wages are subject to standard Medicare tax.

To calculate your additional Medicare tax liability, you’ll need Form 8959 when filing for your tax return. The IRS has instructions for Form 8959 available to help you file correctly.

How It’s Calculated

To calculate how much your additional Medicare tax is, you need to determine how you’re filing your taxes, how much your salary is and how much your salary exceeds the threshold.

For example, if you’re filing single and your income is $250,000, only $50,000 will be subject to the 0.9% tax. This is because the threshold limit for filing single is $200,000. To figure out how much you owe, you would calculate 0.9% of $50,000, which is $450.

Suppose both spouses’ incomes are below $200,000. In that case, their employers will not automatically withhold the additional 0.9%. The employee would need to request additional withholding, pay the estimated taxes or pay the owed amount after filing for the year.

The additional Medicare tax funds the Affordable Care Act tax provisions, as well as the premium tax credit, which helps low-income beneficiaries pay for their premiums.

Enacted in March 2010, The Affordable Care Act’s primary goals are to make health insurance more affordable, expand the Medicaid program, and support new, cost-efficient medical care methods.

Though Medicare offers a wide range of cost and coverage options, funding the Affordable Care Act provides further aid to those in need. Your additional Medicare tax contributions help individuals or families below the federal poverty level.

The Department of Health & Human Services has a briefing book that was updated in March 2022, which highlights the Affordable Care Act’s accomplishments.