18.3 Excess Social Security Withholding, Uncollected Social Security and Medicare Tax, Credit Recapture & Other Taxes (Schedule 2 and Schedule 3)
Key Takeaways
- An employee whose Social Security tax withheld by two or more employers exceeds $10,918.20 for 2025 (6.2% of the $176,100 wage base) claims the excess as a refundable credit on Schedule 3, Line 11; excess withheld by a single employer must be recovered from that employer.
- The Social Security wage base and excess withholding are figured separately for each spouse, even on a joint return.
- Social Security and Medicare tax that an employer could not collect on tips (Form W-2, Box 12, Codes A and B) or on group-term life insurance of a former employee (Codes M and N) is paid by the employee on Schedule 2, Line 13.
- The 2008 first-time homebuyer credit had to be repaid over 15 years beginning with 2010 returns, so the final annual installment was due with 2024 returns; any remaining balance became due earlier if the home was sold or stopped being the main home.
- Other additional taxes include recapture of credits (such as the federal mortgage subsidy and the low-income housing credit), repayment of a clean vehicle credit transferred to a dealer by an ineligible buyer, and additional taxes on HSAs, Archer MSAs, IRAs, and education accounts.
Why This Topic Matters
The Taxation domain includes "Excess Social Security withholding," "Uncollected Social Security and Medicare tax," and "Other taxes (e.g., first-time homebuyer credit repayment)." These items are small in dollars but easy exam questions, because each has a precise trigger and a specific line on Schedule 2 (additional taxes) or Schedule 3 (payments and credits).
Excess Social Security Tax Withheld
For 2025, Social Security tax (OASDI) is 6.2% of wages up to the $176,100 wage base, so the maximum employee tax is $10,918.20. Each employer withholds independently, so a worker with two or more employers can have too much withheld.
| Situation | Remedy |
|---|---|
| Two or more employers together withheld more than $10,918.20 | Refundable credit on Schedule 3, Line 11 (flows to Form 1040, Line 31) |
| A single employer withheld more than $10,918.20 | No credit; the employee must ask the employer to refund it (or file Form 843 if the employer does not) |
| Railroad Retirement (RRTA) tier 1 tax withheld with Social Security tax | Tier 1 is combined with Social Security for the credit |
- Each spouse separately: On a joint return, each spouse figures excess withholding on their own wages. One spouse's excess cannot be combined with the other's.
- Medicare tax is never "excess": The 1.45% Medicare tax has no wage base, and Additional Medicare Tax withheld is reconciled on Form 8959.
Example: In 2025, Ravi earned $120,000 from Employer A (Social Security tax withheld $7,440) and $90,000 from Employer B ($5,580 withheld). Total withheld is $13,020. His credit for excess Social Security tax is $13,020 - $10,918.20 = $2,101.80 on Schedule 3, Line 11.
Uncollected Social Security and Medicare Tax
Sometimes an employer cannot withhold the employee's share of FICA, and the employee must pay it with the return:
| Source | Where It Shows | Where the Employee Pays It |
|---|---|---|
| Tips reported to the employer, but the employee's wages were too small to withhold the FICA on them | Form W-2, Box 12, Code A (Social Security) and Code B (Medicare) | Schedule 2, Line 13 |
| Group-term life insurance over $50,000 provided to a former employee | Form W-2, Box 12, Code M (Social Security) and Code N (Medicare) | Schedule 2, Line 13 |
| Tips not reported to the employer, and allocated tips | Not withheld at all | Form 4137, Schedule 2, Line 5 |
| Wages of a worker treated as an independent contractor who was really an employee | Form 1099-NEC or no form | Form 8919, Schedule 2, Line 6 |
The uncollected tax on Codes A/B and M/N is simply entered on Schedule 2 and added to total tax; no separate form is required.
First-Time Homebuyer Credit Repayment (Form 5405)
The first-time homebuyer credit for homes bought in 2008 (up to $7,500) was really an interest-free loan: it had to be repaid in 15 equal annual installments (generally $500 a year) beginning with the 2010 return. The final installment for a home still owned and used as the main home was therefore due with the 2024 return, so no annual installment is due for 2025.
The unpaid balance becomes due all at once if, before full repayment, the home is sold (repayment limited to the gain on the sale) or stops being the main home. Exceptions apply when the home is transferred to a spouse in a divorce, is destroyed or condemned, or the taxpayer dies. Credits for homes bought in 2009 and 2010 did not have to be repaid unless the home stopped being the main home within 36 months (with exceptions for certain military members). Repayments were reported on Form 5405 and carried to Schedule 2 as an additional tax; the 2025 Schedule 2 now shows that line (Line 10) as reserved, reflecting that the repayment period has run its course.
Other Additional Taxes and Recaptures
| Additional Tax | Trigger | Form / Line |
|---|---|---|
| Federal mortgage subsidy recapture | Selling, within 9 years, a home financed with a qualified mortgage revenue bond or mortgage credit certificate, if income rose above limits | Form 8828; Schedule 2, Line 17b |
| Low-income housing credit recapture | Building no longer qualifies during the compliance period | Form 8611; Schedule 2, Line 16 |
| Clean vehicle credit repayment | Buyer transferred the credit to a dealer but modified AGI exceeded the limit | Form 8936; Schedule 2, Line 1b (new vehicle) or Line 1c (previously owned vehicle) |
| Additional tax on IRAs and other tax-favored accounts | Early distributions, excess contributions, missed RMDs; nonqualified Coverdell, 529, and ABLE distributions | Form 5329; Schedule 2, Line 8 |
| Additional tax on HSA or Archer MSA distributions | Nonqualified distribution before age 65 (20%) | Form 8889 or 8853; Schedule 2, Lines 17c and 17e |
| Education credit recapture | Tax-free assistance or a refund received after the year a credit was claimed | Added to the current-year tax on Line 16 (with Form 8863 recomputation) |
| Excess advance premium tax credit repayment | APTC exceeded the allowable credit | Form 8962; Schedule 2, Line 1a |
These additional taxes are part of total tax for the estimated tax safe harbors, so a taxpayer expecting a large recapture should adjust withholding or estimated payments.
Putting It Together
Example: Lena, a server, received $1,900 of reported tips in December after her final paycheck, so her employer could not withhold FICA on them. Her Form W-2 shows $117.80 in Box 12, Code A and $27.55 in Code B. She also had two employers during 2025 whose combined Social Security withholding was $9,400. Lena owes $145.35 of uncollected Social Security and Medicare tax on Schedule 2, Line 13, and she has no excess Social Security credit because $9,400 is below the $10,918.20 maximum.
In 2025, Marcus and Tanya file jointly. Marcus worked for two employers that withheld $6,200 and $5,400 of Social Security tax. Tanya worked for one employer that withheld $11,100 of Social Security tax in error. What credit for excess Social Security tax may they claim on Schedule 3?
Omar's Form W-2 shows amounts in Box 12 with Code M and Code N for group-term life insurance his former employer continued after he retired. How does Omar report these amounts?
Paula claimed a $7,500 first-time homebuyer credit for a home she bought in 2008 and repaid $500 each year starting with her 2010 return. She still lives in the home. What repayment is due with her 2025 return?