Additional Medicare Tax

Concise Takeaway

The Additional Medicare Tax is a 0.9% tax on high‑income earners. It applies to Medicare wages, self‑employment income, and RRTA compensation above filing‑status thresholds.

What the Additional Medicare Tax Is

The Additional Medicare Tax applies in addition to the regular 1.45% Medicare tax. Taxpayers compute the tax and reconcile withholding using Form 8959.

The tax applies to:

• Medicare wages
• Self‑employment income
• Railroad Retirement Tax Act (RRTA) compensation

Only the amount above the threshold is taxed at 0.9%.

Threshold Amounts

Thresholds are based on filing status and not indexed for inflation.

Medicare wages and self‑employment income are combined to determine whether the threshold is exceeded. RRTA compensation is compared separately.

Employer Withholding Rules

Employers must withhold the 0.9% tax when an employee’s Medicare wages exceed $200,000 in a calendar year.

Key points:

• Withholding begins in the pay period wages exceed $200,000
• Withholding continues for the rest of the year
• Employer withholding is not based on filing status
• Employer withholding does not consider wages from other employers

If too much is withheld, the taxpayer claims credit on Form 8959.

Who Must File Form 8959

A taxpayer must file Form 8959 if any of the following apply:

• Medicare wages and tips on any Form W‑2 exceed $200,000
• RRTA compensation on any Form W‑2 exceeds $200,000
• Combined Medicare wages and self‑employment income (including spouse’s amounts if MFJ) exceed the filing‑status threshold
• Combined RRTA compensation (including spouse’s amounts if MFJ) exceeds the filing‑status threshold

How the Tax Applies

Wages

All Medicare‑taxable wages above the threshold are subject to the 0.9% tax.

RRTA Compensation

RRTA compensation above the threshold is subject to the 0.9% tax, but RRTA is not combined with wages.

Self‑Employment Income

Self‑employment income subject to SE tax is also subject to Additional Medicare Tax above the threshold.

Combined Wages + SE Income

When a taxpayer has both:

• Medicare wages
• Self‑employment income

These amounts are combined to determine whether the threshold is exceeded.

A self‑employment loss is ignored for this purpose.

Threshold Reduction Rule

For taxpayers with both wages and self‑employment income:

• The threshold for SE income is reduced by the amount of Medicare wages received
• The threshold cannot go below zero
• This rule does not apply to RRTA compensation

Reconciliation on the Tax Return

If the taxpayer owes Additional Medicare Tax or had excess withholding, Form 8959 reconciles:

• Tax owed
• Tax withheld
• Amount to include in total tax or claim as credit

Additional Medicare Tax Flow Summary

1. Determine Medicare wages, SE income, and RRTA compensation
2. Compare each category to the filing‑status threshold
3. Combine wages + SE income (RRTA separate)
4. Apply 0.9% to amounts above the threshold
5. Reconcile withholding on Form 8959