Additional Medicare Tax: Everything You Need to Know
By Tax&Facts | Published on | Read: 3 Mins
The Additional Medicare Tax is a surtax that applies to high-income earners in the United States. Introduced in 2013 as part of the Affordable Care Act (ACA), it helps fund Medicare. Unlike the standard Medicare tax, this additional tax only targets individuals with higher earnings.
What is the Additional Medicare Tax?
This is a 0.9% surtax on earned income above a set threshold. It applies to wages, self-employment income, and other compensation — but only affects high-income individuals. The funds go toward Medicare, the federal insurance program for people 65+.
How Much is the Additional Medicare Tax?
The tax is 0.9% and applies to earnings that exceed the following thresholds:
- Single or Head of Household: $200,000
- Married Filing Jointly: $250,000
- Married Filing Separately: $125,000
Example: If you’re married filing jointly and earn $300,000, you’ll pay 0.9% on the $50,000 above the $250,000 threshold.
Who is Affected by the Additional Medicare Tax?
- Wage Earners: Your employer will withhold this tax from your paycheck if your income exceeds the threshold.
- Self-Employed Individuals: You must calculate and pay this surtax when filing your taxes.
- Note: This tax does not apply to investment income like dividends or interest. However, high-income earners may also owe the Net Investment Income Tax (NIIT).
How is the Tax Collected?
For employees, the tax is withheld by your employer once your earnings exceed $200,000 — even if you’re married and your spouse earns separately. If under-withheld, you may owe more at tax time. Self-employed individuals pay through estimated taxes or when filing their return.
Can You Avoid the Additional Medicare Tax?
No — if your earnings exceed the threshold, the 0.9% tax applies. It’s a fixed surtax without exemptions or deductions.
Conclusion
The Additional Medicare Tax is a straightforward surtax on high-income earners, applying to wages and self-employment income above specific thresholds. While it can't be avoided, understanding how it works can help you plan and avoid surprises at tax time. If you’re close to or above the income limits, consult a tax advisor for personalized guidance.
FAQ Frequently Asked Questions (FAQ)
Q1: Does the Additional Medicare Tax apply to all
income?
A1: No, the Additional Medicare Tax applies only to earned income that
exceeds the income threshold. This includes wages and self-employment
income, but does not apply to investment income or income from Social
Security benefits.
Q2: Will I pay the Additional Medicare Tax if my income is below the
threshold?
A2: No, the Additional Medicare Tax only applies if your earned income
exceeds the threshold based on your filing status.
Q3: Is the Additional Medicare Tax refundable?
A3: No, the Additional Medicare Tax is not refundable. It is simply an
additional tax on high-income earners that is collected through payroll
withholding or estimated tax payments.
Q4: Do I need to file anything special for the Additional Medicare
Tax?
A4: No special form is required for the Additional Medicare Tax, but if
you're self-employed, you must report the tax on Schedule SE of your tax
return.
Q5: Is there any way to reduce the amount of Additional Medicare Tax
I owe?
A5: While you cannot avoid the tax, you may reduce your taxable income by
contributing to retirement accounts like IRAs or 401(k)s, which can lower
your overall tax liability.
Article History
v1.0 (May 19, 2025): Initial publication of the article
