The Affordable Care Act created several taxes that are still on the books. The Obamacare tax most individuals encounter is really two taxes on higher earners: a 3.8% Net Investment Income Tax on passive income and a 0.9% Additional Medicare Tax on wages and self-employment income above set thresholds. Large employers can owe per-employee penalties for failing to offer affordable coverage, and starting with the 2026 tax year, marketplace enrollees who received too much in advance premium subsidies must repay the full excess with no income-based cap.
The 3.8% Net Investment Income Tax
You owe the 3.8% Net Investment Income Tax if your modified adjusted gross income exceeds the threshold for your filing status and you have investment income during the year. The thresholds are $200,000 for single filers and heads of household, $250,000 for married couples filing jointly, and $125,000 for married individuals filing separately.1Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
The tax applies to the smaller of two figures: your total net investment income for the year, or the amount by which your modified adjusted gross income exceeds your threshold. So a single filer with $220,000 in modified AGI and $50,000 in net investment income owes 3.8% on $20,000, not on the full $50,000.
What Counts as Investment Income
Net investment income covers most passive earnings: interest, dividends, capital gains from selling stocks or property, rental and royalty income, and distributions from non-qualified annuities. Income earned in the ordinary course of an active trade or business is excluded.1Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
You can reduce the amount subject to the tax by subtracting expenses tied directly to producing that income, including investment interest, advisory and brokerage fees, rental and royalty expenses, and the portion of tax preparation fees allocable to investment income.2Internal Revenue Service. Questions and Answers on the Net Investment Income Tax Report the tax on Form 8960.
The 0.9% Additional Medicare Tax
A separate 0.9% surtax applies to wages, salaries, and self-employment income above the same threshold amounts: $200,000 single, $250,000 joint, and $125,000 married filing separately.3Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax This one hits money you actively earn rather than passive investment gains.
The Withholding Gap for Married Couples
Your employer must begin withholding the 0.9% surtax once your wages from that employer cross $200,000 in a calendar year, regardless of your filing status.4eCFR. 26 CFR 31.3102-4 – Special Rules Regarding Additional Medicare Tax That creates a common trap for married couples: if each spouse earns under $200,000 but their combined income tops $250,000, neither employer withholds the surtax, yet the couple owes it on a joint return. You cover any shortfall when you file, and quarterly estimated payments may be needed to avoid underpayment penalties.
Self-Employment Income
If you are self-employed, the 0.9% surtax applies to self-employment income above the same filing-status thresholds.5eCFR. 26 CFR 1.1401-1 – Tax on Self-Employment Income When you have both wages and self-employment earnings, the threshold for your self-employment income is reduced by whatever wages already applied against it. A single filer earning $150,000 in wages, for example, owes the surtax on self-employment income above the remaining $50,000. Form 8959 handles the calculation and reconciles amounts your employer already withheld.
Employer Penalties for Large Employers
Businesses with 50 or more full-time employees (or the equivalent) are Applicable Large Employers under the ACA and must offer health coverage to their workforce. Part-time hours count toward the threshold: total part-time hours for a month, divided by 120, give the number of full-time-equivalent positions.6Office of the Law Revision Counsel. 26 USC 4980H – Shared Responsibility for Employers Regarding Health Coverage
A qualifying employer must offer coverage to at least 95% of its full-time employees and their dependents, and that coverage must be both affordable and meet minimum value.7Internal Revenue Service. Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act For the 2026 plan year, coverage is affordable if the employee’s share of the premium for the lowest-cost self-only plan is no more than 9.96% of household income.8Internal Revenue Service. Revenue Procedure 2025-25 Minimum value means the plan covers at least 60% of expected costs.
2026 Penalty Amounts
If even one full-time employee receives a premium tax credit through the marketplace, the employer may owe a monthly penalty. The amount depends on the failure:
- Not offering coverage at all (or offering it to fewer than 95% of full-time employees): $3,340 per full-time employee for 2026, minus the first 30 employees.9Internal Revenue Service. href=”https://www.irs.gov/pub/irs-drop/rp-25-26.pdf” target=”_blank” rel=”noopener”>Revenue Procedure 2025-26
- Offering coverage that is unaffordable or fails minimum value: $5,010 per full-time employee who actually receives a marketplace subsidy for 2026.10Internal Revenue Service. Revenue Procedure 2025-26
Penalties are assessed at one-twelfth of the annual amount each month and are billed to the employer by the IRS after review.
Repaying Excess Marketplace Subsidies in 2026
If you buy coverage through the marketplace and take advance premium tax credits to lower your monthly premiums, the credit is reconciled at tax time against your actual income. When you end up earning more than the estimate you gave the marketplace, the credit you truly qualify for is smaller, and you owe the difference back.
Before 2026, the repayment amount was capped at modest dollar limits for households below 400% of the federal poverty level. Those caps are eliminated starting with the 2026 tax year: you repay the full excess regardless of income.11Medicaid.gov. Federal Funding Methodology for Program Year 2026 A mid-year raise, a bonus, or a change in household size can now translate into a sizable tax bill.
The reconciliation happens on Form 8962, which compares advance credits paid against what your final income actually supports.12Internal Revenue Service. Instructions for Form 8962 Reporting income and household changes to the marketplace throughout the year lets it adjust your advance payments and reduces the risk of a large bill in April.
What About the Individual Mandate?
The federal individual mandate is still in the Internal Revenue Code, but the penalty for going without health insurance has been $0 since 2019.13Office of the Law Revision Counsel. 26 USC 5000A – Requirement to Maintain Minimum Essential Coverage You owe nothing to the federal government for being uninsured.
California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia enforce their own coverage requirements with real penalties for residents who lack qualifying coverage and don’t have an approved exemption.14HealthCare.gov. Exemptions From the Fee for Not Having Coverage Penalties in those jurisdictions are generally the greater of a flat dollar amount per adult or 2.5% of household income, with variations by state. If you live in one of them and go uncovered, expect the hit to show up on your state return.
Estimated Payments and 2026 Deadlines
If you expect to owe the Net Investment Income Tax or the Additional Medicare Tax, build those amounts into your quarterly estimated payments. Falling short during the year triggers underpayment penalties at filing. The 2026 quarterly deadlines are April 15, June 15, September 15, and January 15, 2027.15Internal Revenue Service. Form 1040-ES – Estimated Tax for Individuals (2026) The January payment is waived if you file your 2026 return by February 1, 2027, and pay the full balance then.
Taxpayers with prior-year adjusted gross income above $150,000 ($75,000 if married filing separately) can sidestep underpayment penalties by paying at least 110% of the prior year’s total tax across the four installments. That safe harbor is useful when investment income swings and the current year’s liability is hard to pin down.