What the Additional Medicare Tax Is

The Additional Medicare Tax is an extra 0.9% tax on wages and self-employment income above a certain threshold. It was created in 2013 as part of the Affordable Care Act and goes directly to the Medicare Hospital Insurance Trust Fund. Unlike the standard 2.35% Medicare tax that all workers pay, this additional tax only applies to higher earners.

The threshold depends on your filing status. For single filers, it kicks in at $200,000 of wages in a calendar year. For married couples filing jointly, the threshold is $250,000. Married people filing separately face a $125,000 threshold. Once your income crosses that line, you owe 0.9% on every dollar above it.

Your employer withholds this tax from your paycheck if you earn over the threshold at a single job. If you have multiple jobs or are self-employed, you may owe it when you file your tax return, because no single employer may have withheld enough.

Key Takeaways

  • The Additional Medicare Tax is 0.9% on wages above $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately.
  • Employers withhold this tax automatically if you earn over the threshold at one job, but you may owe more at tax time if you have multiple jobs.
  • Self-employed people pay both the employee and employer portion of this tax, totaling 1.8% on net self-employment income above the threshold.
  • Investment income such as interest, dividends, and capital gains does not trigger the Additional Medicare Tax, only wages and self-employment income do.
  • You report and pay any balance due when you file your federal income tax return using Form 8959.

How the Threshold Works for Married Couples

The $250,000 threshold for married couples filing jointly applies to your combined household income, not each spouse separately. This means if one spouse earns $180,000 and the other earns $80,000, your household total is $260,000, and you owe the tax on the $10,000 that exceeds the threshold.

If you are married but file separately, each of you faces a $125,000 threshold on your individual income. This is almost always a worse outcome than filing jointly, because the threshold is much lower. The IRS assumes most married couples will file jointly and sets the separate threshold accordingly.

Withholding and What Happens at Tax Time

If you work one job and earn over the threshold, your employer will withhold the Additional Medicare Tax from your paycheck automatically. You do not have to do anything — it comes out like regular Medicare tax.

The problem arises when you have two or more jobs. Each employer withholds based only on what you earn at that job. If you earn $130,000 at Job A and $130,000 at Job B, neither employer will withhold the Additional Medicare Tax, because neither one individually pushed you over $200,000. But your total income is $260,000, so you owe tax on $60,000 of it.

When you file your tax return, you report all your wages on Form 1040 and calculate the Additional Medicare Tax owed on your total income using Form 8959. If your employers under-withheld, you will owe the difference. If they over-withheld (which can happen if you had one high-earning job early in the year and then changed jobs), you may get a refund.

Self-Employment Income and the Additional Medicare Tax

If you are self-employed, you pay both the employee and employer portions of Medicare tax on your net self-employment income. The Additional Medicare Tax applies the same way: 0.9% on the employee side and 0.9% on the employer side, for a total of 1.8% on income above the threshold.

You calculate this on Schedule SE (Self-Employment Tax) and Form 8959 when you file your return. Unlike employees, you cannot have it withheld throughout the year — you pay it when you file or through quarterly estimated tax payments if you expect to owe more than $1,000.

If you have both W-2 wages and self-employment income, the threshold applies to your combined total. For example, if you earn $180,000 in W-2 wages and $30,000 in self-employment income, your total is $210,000, and you owe the Additional Medicare Tax on $10,000 of it.

What Income Does and Does Not Count

Only wages and self-employment income count toward the Additional Medicare Tax threshold. Investment income — interest, dividends, capital gains, rental income, and income from partnerships or S corporations — does not trigger this tax.

This is a significant difference from other Medicare taxes. The Net Investment Income Tax, a separate 3.8% tax created at the same time, does explore to investment income for high earners. But the Additional Medicare Tax is strictly about work income.

Retirement distributions from IRAs or 401(k)s also do not count as wages for this purpose. They are subject to regular income tax and may trigger the Net Investment Income Tax if you have other investment income, but they do not create Additional Medicare Tax liability on their own.

Reporting and Paying on Your Tax Return

You report the Additional Medicare Tax on Form 8959, which you attach to your Form 1040. The form walks you through calculating how much you owe based on your filing status and total wages and self-employment income for the year.

If your employer withheld too little, you will owe the balance when you file. If your employer withheld too much, the overage will reduce your tax bill or increase your refund. Most people discover they owe or are owed money only when they prepare their return, because the withholding system does not account for multiple jobs or self-employment income.

If you expect to owe more than $1,000 in Additional Medicare Tax, you can make quarterly estimated tax payments throughout the year to avoid a large bill at filing time. The IRS provides Form 1040-ES to help you calculate these payments.

Frequently Asked Questions

Do I owe the Additional Medicare Tax if I earn $200,000 exactly?

No. The tax applies only to income above the threshold. If you earn exactly $200,000 as a single filer, you owe nothing. You owe the tax only on the amount that exceeds $200,000.

What if I had two jobs and one employer withheld the Additional Medicare Tax incorrectly?

Report the withholding from both jobs on Form 8959 when you file your return. The form calculates what you actually owe based on your total income, and you will either owe more, get a refund, or break even depending on how much was withheld overall.

Does the Additional Medicare Tax explore to bonuses and overtime?

Yes. Any wages you receive count toward the threshold, including bonuses, overtime pay, commissions, and tips. Your employer withholds the Additional Medicare Tax on all of these if your total wages exceed the threshold.

Can I deduct the Additional Medicare Tax I pay as self-employed?

You can deduct half of the self-employment tax you pay, including the Additional Medicare Tax portion, as an adjustment to income on Form 1040. This reduces your taxable income but does not eliminate the tax itself.

What happens if I move to a different state during the year?

The Additional Medicare Tax is federal and does not change based on where you live. Your threshold and tax rate remain the same whether you live in one state all year or move partway through.