Who Pays the Additional Medicare Tax?
This tax applies to folks whose Medicare wages, self-employment income, and railroad retirement (RRTA) compensation exceed certain threshold amounts. These thresholds are based on your filing status:
Married Filing Jointly: $250,000
Married Filing Separately: $125,000
All Other Taxpayers: $200,000
How it Works
If you have both Medicare wages and self-employment income, here's how to calculate the Additional Medicare Tax:
Figure out the Additional Medicare Tax on any Medicare wages exceeding your threshold.
Reduce your threshold by the total amount of Medicare wages you received (but not below zero).
Calculate the Additional Medicare Tax on any self-employment income exceeding this reduced threshold.
Remember, don't factor in any self-employment losses for this calculation! Also, compare railroad retirement (RRTA) compensation separately to the threshold.
All Medicare wages, railroad retirement (RRTA) compensation, and self-employment income subject to Medicare tax are subject to Additional Medicare tax, if paid in excess of the applicable threshold for your filing status. For details on wages subject to Medicare tax, check out the chart in Section 15 of Publication 15 (Circular E), Employer’s Tax Guide.
Important Points
"There are no special rules for nonresident aliens or U.S. citizens and resident aliens living abroad for purposes of this provision. Medicare wages, railroad retirement (RRTA) compensation, and self-employment income earned by such individuals will also be subject to Additional Medicare tax, if in excess of the applicable threshold for their filing status."
Employer Responsibilities
Employers, take note! You're responsible for withholding the Additional Medicare Tax from wages or RRTA compensation paid to an employee exceeding $200,000 in a calendar year, regardless of their filing status. Start withholding in the pay period when an employee's wages or RRTA compensation for the year goes over $200,000, and continue throughout the year. Keep in mind, there's no employer match for this tax.
Computing and Reporting the Tax
Use Form 8959, Additional Medicare Tax, to calculate this tax. Report the tax and any withheld amounts on:
Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors
Form 1040-NR, U.S. Nonresident Alien Income Tax Return
Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico)
Tax Withholding and Estimated Tax
To avoid surprises, some taxpayers might need to increase their income tax withholding by filing Form W-4, Employee’s Withholding Certificate, with their employer or make estimated tax payments. Publication 505, Tax Withholding and Estimated Tax has more information.
Need More Information?
For extra details, check out the Instructions for Form 8959 (PDF) and the Questions and Answers for the Additional Medicare Tax. We're here to help you understand and meet your tax obligations!