What Additional Medicare Tax Is

Additional Medicare Tax is an extra 0.9% tax on wages and self-employment income that applies when your earnings go above a certain threshold. Unlike the standard Medicare tax (which is 1.45% for employees and 2.9% for self-employed people), this additional tax has no employer match — you pay it all yourself if you cross the income line.

The threshold depends on your filing status. If you're single, it kicks in at $200,000 of wages per year. If you're married filing jointly, the threshold is $250,000. Married filing separately has a $125,000 threshold. These thresholds do not adjust for inflation, so they stay the same year to year.

Your employer withholds this tax automatically once your wages exceed the threshold in a single calendar year. If you're self-employed, you pay it when you file your tax return. The tax applies to Medicare wages, tips, and net self-employment income — essentially the same income that regular Medicare tax applies to, just above the cutoff point.

Key Takeaways

  • Additional Medicare Tax is 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly), with no employer contribution.
  • Your employer automatically withholds this tax once your annual wages cross the threshold; you do not need to do anything.
  • Self-employed people calculate and pay this tax on their tax return based on net self-employment income above the threshold.
  • The income thresholds remain fixed and do not change year to year, even though other tax brackets adjust for inflation.
  • This tax funds Medicare Part A (hospital insurance) and applies to all wages and self-employment income, regardless of age.

Who Pays Additional Medicare Tax

You pay Additional Medicare Tax if your income for the year exceeds the threshold for your filing status. This applies whether you are 30 or 75 — age does not matter. The tax applies to all wages you earn, including bonuses, commissions, and tips.

If you have more than one job, your employers do not coordinate with each other. Each employer withholds based only on what they pay you. This means if you earn $120,000 at one job and $100,000 at another, both employers might withhold the tax even though your combined income is $220,000 — only $20,000 above the single threshold. When you file your tax return, you can claim a credit for the overpayment, and the IRS will refund it.

Self-employed people (including gig workers and business owners) owe the tax on net self-employment income above the threshold. You calculate it on Schedule SE when you file your return, and it is part of your self-employment tax payment.

How the Tax Is Calculated

The calculation is straightforward: take your wages or self-employment income above the threshold and multiply by 0.9%. For example, if you are single and earn $220,000 in wages, you owe Additional Medicare Tax on $20,000 ($220,000 minus $200,000). That is $20,000 × 0.009 = $180.

For employees, your employer handles this. Once your year-to-date wages hit the threshold, your employer withholds 0.9% on all wages after that point for the rest of the year. You see this on your pay stub as a separate line item, often labeled "Medicare tax" or "Additional Medicare tax."

For self-employed people, you calculate the tax yourself on Schedule SE (Self-Employment Tax) when you file your annual tax return. You use your net self-employment income (business income minus business expenses) to determine whether you owe it and how much.

The Difference Between Regular Medicare Tax and Additional Medicare Tax

Regular Medicare tax is 1.45% on all wages, with no income limit. Your employer withholds 1.45% from your paycheck, and your employer also pays 1.45% on your behalf — a total of 2.9% funding Medicare Part A. Self-employed people pay the full 2.9% themselves.

Additional Medicare Tax is only 0.9% and only applies to income above the threshold. There is no employer match. It is an extra layer on top of the regular Medicare tax, not a replacement for it. So if you earn $220,000 as a single employee, you pay 1.45% Medicare tax on all $220,000, plus an additional 0.9% on the $20,000 above the threshold.

The regular Medicare tax has been in place since 1965. Additional Medicare Tax was added in 2013 as part of the Affordable Care Act and was designed to help fund Medicare as the program's costs grew.

Withholding and What Happens at Tax Time

If you are an employee, your employer is responsible for withholding Additional Medicare Tax once your wages cross the threshold. You do not need to tell them or fill out a form — the withholding happens automatically based on your W-4 and your year-to-date pay.

If you have multiple jobs and overpay because each employer withheld the tax independently, you will see this when you file your tax return. You report all wages on your return, and the IRS calculates the correct amount of Additional Medicare Tax you should have paid. If you overpaid, you get a refund. If you underpaid (which is rare), you owe the difference.

Self-employed people do not have withholding. Instead, you calculate the tax when you file your return on Schedule SE. If you expect to owe Additional Medicare Tax, you may want to make estimated tax payments throughout the year to avoid a large bill at tax time. The IRS provides Form 1040-ES to help you calculate quarterly payments.

Income That Counts Toward the Threshold

Additional Medicare Tax applies to wages, tips, and net self-employment income. It does not explore to investment income like dividends, capital gains, or interest. It also does not explore to retirement distributions, Social Security benefits, or other non-wage income.

If you have both W-2 wages and self-employment income, both count toward the threshold. For example, if you earn $180,000 in wages and $30,000 in self-employment income as a single person, your total is $210,000, so you owe Additional Medicare Tax on $10,000.

Certain types of compensation are excluded. Employer-provided health insurance premiums, contributions to a 401(k) or similar retirement plan, and some other fringe benefits do not count as wages for Medicare tax purposes. Your W-2 will show your Medicare wages in Box 5, which is the amount used to calculate the tax.

Planning and Questions About Your Specific Situation

If you are close to the threshold or expect to cross it, you may want to review your pay stubs to see whether withholding is happening correctly. If you have multiple jobs, keep track of your combined year-to-date wages so you can anticipate whether you will owe at tax time.

If you are self-employed, consider working with a tax professional or using tax software that handles Schedule SE. The calculation can be complex if you have both business income and W-2 wages, and getting it wrong can lead to underpayment penalties.

Your tax return is the final word on how much Additional Medicare Tax you owe. If you have questions about your specific situation — especially if you have income from multiple sources — the IRS website has worksheets and examples, or you can speak with a tax professional.

Frequently Asked Questions

Does Additional Medicare Tax explore to retirement income or Social Security?

No. Additional Medicare Tax only applies to wages, tips, and self-employment income. Retirement account distributions, Social Security benefits, pensions, and investment income do not count toward the threshold and are not subject to the tax.

What if I work part-time and do not think I will reach the threshold?

If your total wages for the year stay below the threshold for your filing status, you will not owe Additional Medicare Tax. You still pay regular Medicare tax (1.45%) on all your wages, but the additional 0.9% does not explore.

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

No. The threshold is based on your individual income and filing status. If you are married filing jointly, the threshold is $250,000 combined. If you file separately, each spouse has a $125,000 threshold. You cannot reduce your tax by dividing income between spouses.

What happens if my employer withholds too much Additional Medicare Tax?

You will get a refund when you file your tax return. This often happens when you have multiple jobs and each employer withholds the tax independently. Report all your wages on your return, and the IRS will calculate the correct amount and refund any overpayment.

Do I need to do anything special to pay Additional Medicare Tax if I am self-employed?

You calculate it on Schedule SE when you file your annual tax return. If you expect to owe a significant amount, you can make quarterly estimated tax payments using Form 1040-ES to spread the cost throughout the year and avoid a large bill at tax time.