The Additional Medicare Tax is a 0.9% surcharge on wages, self-employment income, and railroad retirement compensation above certain thresholds, layered on top of the standard 1.45% Medicare tax.1Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax It took effect for tax years beginning after December 31, 2012, as part of the Affordable Care Act.2Internal Revenue Service. Questions and Answers for the Additional Medicare Tax There’s no employer match. You pay the full 0.9% yourself.
Income Thresholds by Filing Status
Whether you owe the tax depends on your filing status and how much you earn:
- Married filing jointly: $250,000
- Married filing separately: $125,000
- Single, head of household, or qualifying surviving spouse: $200,000
The 0.9% applies only to the income above the threshold, not to every dollar you earn. A single filer with $210,000 in wages owes 0.9% on $10,000, which comes to $90.1Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
The Thresholds Never Change
The $200,000 and $250,000 figures are hardcoded in the statute with no inflation adjustment.1Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax They have not moved since 2013. Ordinary wage growth has pushed many more workers past those lines, so if you’ve recently crossed the threshold on a raise or a strong self-employment year, you’re now subject to a tax that didn’t reach someone at your real purchasing power a decade ago.
What Income Counts
Three categories of earned income are in scope: wages subject to standard Medicare tax (including noncash fringe benefits and tips), net self-employment income reported on Schedule SE, and railroad retirement compensation.2Internal Revenue Service. Questions and Answers for the Additional Medicare Tax Dividends, capital gains, and rental income are not subject to the Additional Medicare Tax. (A separate 3.8% tax may apply to that income; see below.)
When You Have Both Wages and Self-Employment Income
You don’t get two separate thresholds. Your wages eat into the threshold available for your self-employment income. Apply the 0.9% first to any wages above your filing-status threshold. Then reduce that threshold by your total wages, and apply the 0.9% to any self-employment income above whatever’s left.2Internal Revenue Service. Questions and Answers for the Additional Medicare Tax A self-employment loss does not offset your wages.
Say you’re a single filer with $180,000 in wages and $50,000 in net self-employment income. Your wages don’t cross $200,000, so no tax is owed on them. But your remaining threshold is only $20,000, so you owe 0.9% on $30,000 of self-employment income.3Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
How Employer Withholding Works
Your employer must withhold the 0.9% once your wages with that employer cross $200,000 in a calendar year, regardless of your filing status.4Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates That flat trigger creates mismatches in both directions.
A married couple filing jointly with $250,000 in combined wages split evenly between two jobs won’t see anything withheld at either employer, and that’s fine because they don’t owe anything. Flip the situation: a married-filing-separately filer owes the tax starting at $125,000, but withholding doesn’t begin until $200,000, leaving a gap to cover at filing.
Employers also don’t coordinate. Two jobs paying $120,000 and $100,000 produce no withholding, because neither employer sees you cross $200,000. But your $220,000 total triggers the tax if you file as single, and the shortfall is yours to make up.2Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
Asking Your Employer to Withhold Extra
If you know you’ll owe the tax, enter an amount on line 4(c) of Form W-4 to have extra money withheld each pay period.2Internal Revenue Service. Questions and Answers for the Additional Medicare Tax It’s treated as regular income tax withholding on your W-2 rather than as Medicare withholding specifically, but it gets credited against your total tax when you file, which includes the Additional Medicare Tax.
Filing Form 8959
You calculate the tax and reconcile it with any withholding on Form 8959, which attaches to your Form 1040, 1040-SR, 1040-NR, or 1040-SS.5Internal Revenue Service. Instructions for Form 8959 Wages come from Box 5 of your W-2s; self-employment income comes from Schedule SE; railroad retirement compensation is handled on its own part of the form.
The form ends by comparing what you owe against what your employer already withheld. If your employer withheld more than you actually owe (common when a single-filer household’s wages triggered withholding at $200,000 but the couple’s joint threshold is $250,000), the excess becomes a credit against your income tax on the return.6Internal Revenue Service. About Form 8959, Additional Medicare Tax Married couples filing jointly aggregate both spouses’ wages before comparing to the $250,000 threshold.
Estimated Payments and the Underpayment Penalty
When withholding falls short, quarterly estimated payments are the way to cover the difference. The IRS charges an underpayment penalty under Internal Revenue Code Section 6654 on any shortfall for each quarter you underpaid.7Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax
Two safe harbors avoid the penalty. Pay at least 90% of your current-year tax liability, or pay at least 100% of your prior-year tax through withholding and estimates. The 100% figure rises to 110% if your prior-year adjusted gross income exceeded $150,000 ($75,000 if married filing separately).7Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax Most people who owe the Additional Medicare Tax are in 110% territory.
Self-employed taxpayers face the most exposure, since no employer is withholding on their behalf. The entire 0.9% has to come through quarterly estimates or other withholding. If your income swings year to year, the 90% current-year safe harbor requires reasonably accurate projections.
Not the Same as the Net Investment Income Tax
The 3.8% Net Investment Income Tax (NIIT) took effect the same day and uses the same filing-status thresholds, but it hits different income.8Internal Revenue Service. Net Investment Income Tax The 0.9% Additional Medicare Tax applies to earned income. The 3.8% NIIT applies to dividends, capital gains, rental and royalty income, and passive business income.9Internal Revenue Service. Questions and Answers on the Net Investment Income Tax You can owe both in the same year, but never on the same dollar. They’re calculated on separate forms (8959 and 8960), and neither reduces the base for the other.
Nonresidents and Americans Working Abroad
There are no special exemptions or modified rules for nonresident aliens or U.S. citizens living outside the country. If your wages, self-employment income, or railroad retirement compensation is subject to regular Medicare tax and exceeds your filing-status threshold, the 0.9% applies.2Internal Revenue Service. Questions and Answers for the Additional Medicare Tax Wages that a totalization agreement or other provision keeps out of the Medicare tax base stay out of the Additional Medicare Tax as well.