What the Medicare Surtax Is
The Medicare surtax 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 applies only to higher earners. Unlike the standard 1.45% Medicare tax that everyone pays, this additional tax has no employer match — you pay the full amount yourself if you cross the income line.
The threshold depends on your filing status. For single filers, it kicks in at $200,000 of wages or self-employment income. For married couples filing jointly, the threshold is $250,000. For married filing separately, it is $125,000. Once your income exceeds these amounts, the surtax applies to every dollar above the threshold.
The surtax is withheld from your paycheck by your employer, or you pay it when you file your tax return if you are self-employed. It goes into the Medicare Hospital Insurance Trust Fund, the same fund that pays for Medicare Part A (hospital coverage).
Key Takeaways
- The Medicare surtax is 0.9% on wages and self-employment income above $200,000 (single) or $250,000 (married filing jointly).
- This tax is separate from the standard 1.45% Medicare tax everyone pays and has no employer contribution.
- Your employer should withhold the surtax automatically if your wages exceed the threshold, but you may owe additional surtax at tax time if you have multiple jobs or investment income.
- The surtax applies to wages, tips, and net self-employment income, but not to investment income like dividends or capital gains.
Who Pays the Medicare Surtax
You pay the surtax only if your income exceeds the threshold for your filing status. The income that counts includes W-2 wages from your employer and net self-employment income if you own a business. If you are married and file jointly, you and your spouse's income are combined to determine whether you cross the $250,000 line.
Having multiple jobs can push you over the threshold even if no single employer pays you that much. For example, if you earn $120,000 from one job and $90,000 from a second job, your combined income of $210,000 triggers the surtax on the $10,000 above the $200,000 threshold. Your employers may not know about each other's paychecks, so you might need to reconcile this when you file your tax return.
The surtax 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.
How the Surtax Is Withheld From Your Paycheck
If you work as an employee and your wages are expected to exceed the threshold, your employer should withhold the 0.9% surtax from your paycheck once you cross the income line. The withholding begins in the pay period when your cumulative wages reach the threshold. Your pay stub will show this as a separate line item, often labeled "Medicare surtax" or "Additional Medicare tax."
If you have only one employer, the withholding process is straightforward. Your employer tracks your year-to-date wages and starts withholding once you pass the threshold. However, if you change jobs mid-year or have multiple employers, each one withholds based only on what they pay you. This can result in under-withholding, meaning you may owe surtax when you file your tax return.
Self-employed people do not have an employer to withhold the surtax. Instead, you calculate it when you file your tax return based on your net self-employment income. You can make estimated tax payments throughout the year to cover the surtax, or pay it all when you file.
What Happens If You Owe Surtax at Tax Time
When you file your federal tax return, you report all income subject to the surtax and calculate whether you owe additional tax beyond what was withheld. If your employer under-withheld — for example, because you had multiple jobs and no single employer knew your total income — you will owe the difference when you file.
You report the surtax on Form 8959, Additional Medicare Tax, and attach it to your Form 1040. The IRS will calculate any balance due or refund owed. If you owe, you can pay it with your tax return or set up a payment plan with the IRS if the amount is large.
To avoid surprises, you can adjust your withholding during the year if you realize you will exceed the threshold. Contact your employer's payroll department and ask them to increase your Medicare tax withholding, or you can make estimated tax payments to cover the expected surtax.
The Difference Between the Surtax and Regular Medicare Tax
Everyone who works pays the standard Medicare tax of 1.45% on all wages and self-employment income, with no income limit. Your employer matches this 1.45% if you are an employee. The surtax is an additional 0.9% that applies only to income above the threshold, and there is no employer match.
Together, the standard Medicare tax and the surtax can total 2.35% of your wages if you are an employee earning above the threshold. If you are self-employed, you pay both the employee and employer portions of the standard Medicare tax (2.9% total) plus the 0.9% surtax on income above the threshold, for a combined rate of 3.8% on the excess income.
| Tax Type | Rate | Income Limit | Employer Match |
|---|---|---|---|
| Standard Medicare Tax | 1.45% | None — applies to all wages | Yes, 1.45% |
| Medicare Surtax | 0.9% | $200,000 (single) / $250,000 (married) | No |
Frequently Asked Questions
Does the Medicare surtax explore to my 401(k) contributions?
No. The surtax applies only to wages you actually receive. Money you contribute to a traditional 401(k) is deducted from your gross pay before Medicare tax is calculated, so it does not trigger the surtax. However, if you withdraw money from a 401(k) after retirement, those distributions are not subject to the surtax either.
What if I am married and file separately?
If you file separately, the threshold drops to $125,000 per person. This means you will owe the surtax on income above $125,000 even if your spouse earns less. Filing separately is usually more expensive overall, so consult a tax professional before choosing this option.
Can I deduct the Medicare surtax on my tax return?
No. The surtax is not deductible. However, if you are self-employed, you can deduct half of your total self-employment tax (including the surtax portion) as an adjustment to income on your Form 1040. This reduces your taxable income but does not eliminate the surtax itself.
Do I pay the surtax on bonuses and overtime?
Yes. Any wages your employer pays you — including bonuses, overtime, and commissions — count toward the income threshold and are subject to the surtax once you cross it. Your employer withholds the surtax the same way they do for regular wages.