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 as part of the Affordable Care Act and started in 2013. Unlike the regular Medicare tax (which is 2.9% total — 1.45% from you and 1.45% from your employer), this additional tax applies only to income above the threshold amount, and you pay the full 0.9% yourself.

The threshold depends on your filing status. For single filers, it is $200,000 per year. For married couples filing jointly, it is $250,000. For married couples filing separately, it is $125,000. If your wages or self-employment income exceed these amounts, your employer or you (if self-employed) will withhold the extra tax.

This tax funds Medicare Part A (hospital insurance). It does not change your Medicare benefits or coverage — it is straightforward an additional payroll deduction for higher earners.

Key Takeaways

  • The Additional Medicare Tax is 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly), and you pay the entire amount yourself.
  • Your employer withholds this tax automatically if your wages cross the threshold, or you pay it when you file taxes if you are self-employed.
  • The threshold amounts do not adjust for inflation and have remained the same since 2013.
  • If you have multiple jobs or are self-employed and also work for an employer, you may owe this tax even if no single employer withheld it.
  • You can claim a credit on your tax return if you overpaid due to having multiple employers.

Who Pays the Additional Medicare Tax

You pay the Additional Medicare Tax if your income exceeds the threshold for your filing status. This includes W-2 wages from an employer and net self-employment income. If you are married and file jointly, both spouses' incomes count toward the $250,000 threshold — it is not $250,000 per person.

The tax applies to all income above the threshold, regardless of age. You do not have to be a certain age to owe it, and it does not matter whether you are already receiving Social Security or Medicare benefits.

If you have multiple jobs, each employer withholds based only on what they pay you. This can mean no single employer withholds the tax, but you still owe it when your combined income exceeds the threshold. You will settle this when you file your tax return.

How the Tax Is Withheld or Paid

If you are an employee, your employer withholds the 0.9% Additional Medicare Tax from your paycheck once your year-to-date wages reach the threshold. You will see it listed separately on your pay stub as "Additional Medicare Tax" or similar language. Your employer sends this money to the IRS along with your regular Medicare and Social Security taxes.

If you are self-employed, you pay the Additional Medicare Tax when you file your annual tax return (Form 1040). You calculate it based on your net self-employment income for the year. You do not make quarterly estimated tax payments for this tax alone — it is settled when you file.

If you have both W-2 income and self-employment income, you may owe the tax on the combined total. The IRS provides a worksheet on Form 8959 to help you calculate what you owe.

What Happens If Multiple Employers Withhold the Tax

If you work for more than one employer and each one withholds the Additional Medicare Tax, you may have overpaid. This can happen when your total income from all jobs exceeds the threshold, but no single employer knew about your other income.

When you file your tax return, you can claim a credit for the overpayment. You report all your wages on your return, and the IRS calculates how much you should have paid in total. If you paid more than that, you receive the difference as a refund or credit against other taxes owed.

To claim this credit, you do not need to do anything special — the IRS calculates it automatically when you file. However, make sure all your W-2 forms are reported on your return so the IRS has the complete picture of your income.

Income That Does and Does Not Count

The Additional Medicare Tax applies to W-2 wages and net self-employment income. It does not explore to investment income such as interest, dividends, capital gains, or rental income. It also does not explore to Social Security benefits, pension payments, or distributions from retirement accounts like IRAs or 401(k)s.

If you are retired and living on investment income and Social Security, you will not owe the Additional Medicare Tax. However, if you return to work and earn wages above the threshold, the tax applies to those wages only.

Some types of compensation, such as certain fringe benefits or employer-provided health insurance premiums, may not count toward the threshold. If you have questions about whether a specific type of income counts, the IRS Form 8959 instructions provide detailed guidance.

The Threshold Has Not Changed Since 2013

The income thresholds ($200,000 for single filers and $250,000 for married filing jointly) were set when the tax began in 2013 and have not been adjusted since. Unlike many tax provisions, these thresholds do not increase with inflation each year.

This means that over time, more people reach the threshold as wages rise. Someone earning $200,000 in 2013 was in a different economic position than someone earning $200,000 today, but both owe the tax.

Congress would need to pass new legislation to change these thresholds. As of now, there is no automatic adjustment mechanism.

Frequently Asked Questions

Does the Additional Medicare Tax change my Medicare benefits?

No. The tax funds Medicare Part A (hospital insurance), but paying it does not increase your benefits or change your coverage. Your Medicare benefits are based on your age, work history, and when you enroll — not on how much Additional Medicare Tax you paid.

What if I am self-employed and also work for an employer?

Your employer withholds the tax on your W-2 wages. When you file your tax return, you report both your W-2 income and your self-employment income. The IRS calculates whether you owe the tax on the combined total and adjusts your return accordingly. Use Form 8959 to calculate this.

Can I avoid the Additional Medicare Tax by splitting income with my spouse?

No. If you are married and file jointly, the IRS combines both spouses' income to determine whether you exceed the $250,000 threshold. The threshold is per household, not per person. If you file separately, each spouse has a $125,000 threshold, but filing separately usually results in higher taxes overall.

Do I owe this tax if I am over 65 and still working?

Yes, if your income exceeds the threshold. Age does not exempt you from the Additional Medicare Tax. You continue to pay it as long as you have earned income above the threshold, regardless of whether you are already receiving Medicare or Social Security.

What if my income drops below the threshold partway through the year?

If you are an employee and your employer has already withheld the Additional Medicare Tax, you can claim a credit when you file your tax return if you overpaid. You do not need to ask your employer to stop withholding — just report the overpayment on Form 8959 when you file.