Additional Medicare Tax (0.9%)
Additional Medicare Tax is a 0.9% tax on wages, self-employment income, and railroad retirement compensation exceeding $200,000 (single) or $250,000 (married filing jointly), with no employer match and reported on Form 8959.
Exam Tip
0.9% on wages/SE income above $200K (single)/$250K (MFJ). NO employer match. NOT indexed for inflation. Different from 3.8% NIIT on investment income.
What is the Additional Medicare Tax?
The Additional Medicare Tax is a 0.9% surtax that applies to high earners on their employment income. It was enacted as part of the Affordable Care Act (ACA) in 2013 and applies in addition to the regular 1.45% Medicare tax.
Tax Rate and Thresholds
| Filing Status | Threshold | Rate |
|---|---|---|
| Single | $200,000 | 0.9% |
| Married Filing Jointly | $250,000 | 0.9% |
| Married Filing Separately | $125,000 | 0.9% |
| Head of Household | $200,000 | 0.9% |
Note: These thresholds are NOT indexed for inflation and have remained unchanged since 2013.
Income Subject to Additional Medicare Tax
| Income Type | Subject to 0.9% Tax? |
|---|---|
| Wages (W-2) | YES |
| Self-employment income | YES |
| Railroad retirement (RRTA) | YES |
| Investment income | NO (subject to 3.8% NIIT instead) |
| Retirement distributions | NO |
| Passive income | NO (but may be subject to NIIT) |
How It Works
Employer Withholding
- Employers MUST withhold 0.9% on wages exceeding $200,000 (regardless of filing status)
- No employer match (unlike regular Medicare tax)
- Withholding starts when wages exceed $200,000 in a calendar year
Self-Employment
- 0.9% applies to self-employment income above threshold
- Combined with regular SE tax (2.9% Medicare portion)
- Total Medicare tax on SE income above threshold: 3.8%
Calculation Example
Married Filing Jointly with $350,000 in combined wages:
| Calculation | Amount |
|---|---|
| Combined wages | $350,000 |
| Threshold (MFJ) | $250,000 |
| Subject to 0.9% | $100,000 |
| Additional Medicare Tax | $100,000 x 0.9% = $900 |
CFP Exam Focus
Know the 0.9% rate and thresholds ($200K single, $250K MFJ). No employer match. Thresholds NOT indexed for inflation. Different from 3.8% NIIT which applies to investment income. Use Form 8959.