What Is the Medicare Excess Tax and Who Pays It?

The Additional Medicare Tax is a 0.9% surcharge on wages, self-employment income, and railroad retirement compensation above $200,000 for single filers or $250,000 for married couples filing jointly.¹ It sits on top of the standard 1.45% Medicare tax, and unlike that standard tax, there is no employer match. You pay the entire 0.9% yourself, and only on the dollars above the threshold for your filing status.²

Income Thresholds by Filing Status

The thresholds are set by statute and have never been adjusted for inflation, which pulls more earners above the line every year.³

Single or Head of Household: $200,000
Married Filing Jointly: $250,000
Married Filing Separately: $125,000
Qualifying Surviving Spouse: $200,000

The math is simple once you know your threshold. A single filer earning $240,000 pays 0.9% on the $40,000 above $200,000, or $360 for the year. A married couple filing jointly with $300,000 in combined wages pays on $50,000, adding $450.

What Income Triggers the Tax

The 0.9% reaches earned income that already carries the standard Medicare tax. For most people, that means W-2 wages and salary, but a few other categories count and sometimes catch people off guard.

Tips count toward your total, so a worker with significant tip income can cross the threshold even when base pay alone would not.¹ Non-cash fringe benefits subject to regular Medicare tax are also included, such as the imputed cost of employer-provided group-term life insurance above $50,000.⁴ Net self-employment earnings subject to SECA tax count too, as does Railroad Retirement Tax Act compensation. RRTA compensation and FICA wages are measured separately when checking the threshold, not combined.

Investment income is outside the scope of this tax. Interest, dividends, capital gains, and rental income do not trigger the 0.9%. That kind of income may instead fall under the separate 3.8% Net Investment Income Tax, which uses the same dollar thresholds but applies to a different category of earnings and never doubles up on the same dollar.⁵

Why Employer Withholding Often Misses

Your employer starts withholding the 0.9% as soon as your wages from that job pass $200,000 in the calendar year, and keeps withholding through year-end.² The employer does not look at your filing status, your spouse’s income, or wages from any other job. It watches the $200,000 line for each employee, period.

That mechanical approach creates predictable mismatches between what gets withheld and what you actually owe. Three common scenarios:

Dual-income married couples. You and your spouse each earn $150,000. Neither employer withholds anything because neither of you crossed $200,000. But your combined $300,000 exceeds the $250,000 joint threshold by $50,000, and you owe $450 at filing time.¹
Married filing separately. You earn $180,000 and file separately. Your employer withholds nothing because you’re under $200,000, but your filing threshold is only $125,000, so you owe the tax on $55,000.
Single high earner. You earn $300,000. Your employer withholds on $100,000 of wages, your actual liability matches, and you’re square.

Whatever your employer withholds shows up in Box 6 of your W-2, combined with regular Medicare tax. You reconcile the difference when you file.

If You’re Self-Employed

Self-employed individuals calculate the Additional Medicare Tax on Schedule SE as part of their self-employment tax.⁶ Two features of the self-employment rules deserve attention.

First, if you have both wages and self-employment income, wages count first against your threshold. Whatever threshold room is left applies against your self-employment income, and the 0.9% hits anything above that remainder.⁷ Say you file jointly, earn $230,000 in wages, and have $60,000 in net self-employment income. Your wages use up $230,000 of the $250,000 threshold. The next $20,000 of self-employment income is sheltered, and the remaining $40,000 is taxed at 0.9%, adding $360.

Second, you don’t get to deduct any of the 0.9% from your adjusted gross income. The usual half-of-SE-tax deduction exists because self-employed people pay both the employee and employer shares of standard Medicare and Social Security.⁸ The Additional Medicare Tax has no employer-side portion in the first place, so none of it is deductible.

Reporting on Form 8959

You must file Form 8959 if your Medicare wages on any single W-2 exceed $200,000, your RRTA compensation on any single W-2 exceeds $200,000, or your combined Medicare wages and self-employment income (including your spouse’s, if filing jointly) exceed the threshold for your filing status.⁹

Form 8959 is where you calculate the actual tax owed on each category of income, compare it to what your employer already withheld, and send the result to Schedule 2 of your Form 1040.¹⁰ If your employer over-withheld, the excess becomes a credit on your return. If your employer under-withheld, you owe the balance.

Avoiding an Underpayment Penalty

The dual-income couple scenario is where most people get caught. Neither employer withholds the tax, the couple doesn’t realize they owe it, and they face both a balance due and an underpayment penalty at filing time. Self-employed workers face the same risk if they don’t fold the 0.9% into their quarterly estimated payments.

If you expect to owe the Additional Medicare Tax and your paycheck withholding won’t cover it, you have two ways to catch up during the year:

Add extra withholding on Form W-4. Step 4(c) lets you enter an additional flat dollar amount to withhold each pay period. The IRS specifically recommends this for taxpayers subject to the Additional Medicare Tax. The extra withholding technically shows up on the income tax line, but it offsets any liability on your return.¹¹
Make quarterly estimated payments with Form 1040-ES. This is especially important for self-employed individuals whose entire 0.9% liability sits outside any employer withholding system.¹²

To avoid the underpayment penalty, your total payments for the year generally need to equal at least 90% of your current-year tax liability or 100% of last year’s tax. If your adjusted gross income last year was over $150,000 ($75,000 if married filing separately), the safe harbor rises to 110% of last year’s tax.¹³ The IRS Tax Withholding Estimator accounts for the Additional Medicare Tax and can tell you whether your current withholding is on track.¹⁴

1
Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
2
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
3
Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
4
Internal Revenue Service. Group-Term Life Insurance
5
Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
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Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
7
Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
8
Internal Revenue Service. Topic No. 554, Self-Employment Tax
9
Internal Revenue Service. Instructions for Form 8959 (2025)
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Internal Revenue Service. Form 8959 – Additional Medicare Tax
11
Internal Revenue Service. Employee’s Withholding Certificate Form W-4 2026
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Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals
13
Internal Revenue Service. Estimated Tax
14
Internal Revenue Service. Tax Withholding Estimator FAQs