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If you’re a high-income earner, you may be subject to the Additional Medicare Tax, a 0.9% tax on earnings that exceed specific thresholds based on your tax filing status.
This tax, first introduced under the Affordable Care Act (ACA) in 2013, applies to wages, railroad retirement (RRTA) compensation, and self-employment income that surpass these limits. With the 2025 tax season approaching, it’s essential to know if this tax applies to you – and how it’s calculated.
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Who Needs to Pay the Additional Medicare Tax?
You are liable for the Additional Medicare Tax if your combined wages, compensation, or self-employment income – along with your spouse’s if you file jointly – go beyond the IRS-established thresholds. These limits depend on your filing status:
- Filing Status / Threshold
- Married filing jointly $250,000
- Married filing separately $125,000
- Single $200,000
- Head of household (with qualifying person) $200,000
- Qualifying widow(er) with dependent child $200,000
What Income Is Subject to the Additional Medicare Tax?
The Additional Medicare Tax applies to all Medicare-taxable income that exceeds these thresholds. This includes wages, tips, non-cash fringe benefits, and self-employment income.
If your employer pays you over $200,000 in a year, they must start withholding this tax, even if you file jointly and won’t meet the $250,000 threshold – employers do not take your spouse’s income into account when withholding.
If you work multiple jobs and no single employer withholds the tax because your income from each is below $200,000, you are still responsible for calculating and paying it when you file your tax return. You can adjust your Form W-4 to request additional withholding or make estimated tax payments if needed.
Non-cash income, such as certain fringe benefits, RRTA compensation, and tips, are all subject to this tax once thresholds are exceeded. There are no special exemptions for nonresident aliens or U.S. citizens living abroad-if the income is Medicare-taxable, this tax applies.
How to Calculate and Report Additional Medicare Tax
Taxpayers calculate the Additional Medicare Tax using Form 8959, which is filed alongside Form 1040 or 1040-SR. Employers will report any amount withheld on your Form W-2.
Examples of how it’s calculated:
- Single filer earning $130,000 in wages and $145,000 in self-employment income: Since combined income is $275,000, this exceeds the $200,000 threshold. The tax applies to $75,000 of self-employment income.
- Married filing jointly, with one spouse earning $150,000 in wages and the other $175,000 in self-employment income: Combined income is $325,000, exceeding the $250,000 threshold. They owe the tax on $75,000 of self-employment income.
- Head of household earning $225,000 in wages and $50,000 in self-employment income: The tax applies to $25,000 of wages and $50,000 of self-employment income, as total earnings surpass the $200,000 threshold.
Key Takeaways for Taxpayers in 2025
- The Additional Medicare Tax rate is 0.9% on earnings over the thresholds.
- Employers must withhold this tax on wages exceeding $200,000 annually, even if you file jointly and may not owe it when all income is counted.
- Self-employed individuals must calculate and pay the tax themselves using Form 8959.
- If your income includes wages and self-employment income, they are combined to determine your total liability.
- Fringe benefits and tips also count toward the threshold.
- stimated tax payments or adjusting withholding may be necessary to avoid owing large sums at tax time.
Understanding when you are liable for the Additional Medicare Tax can help you avoid surprises during tax season. If you expect to cross income thresholds, planning ahead by increasing withholding or making estimated payments is critical.
Always consult IRS Publication 15 (Circular E) for employer guidance and Publication 505 for more on tax withholding and estimated tax rules.
If you’re unsure how this applies to you, consulting a tax professional or using tax software like TurboTax can ensure accurate calculation and compliance.