Sunday, March 6, 2016

What is the Additional Medicare Tax and Who Pays It?

Some taxpayers may be required to pay an Additional Medicare Tax if their income exceeds certain limits. The Additional Medicare TaxHere are some things that you should know about this tax:
  • Tax Rate.  The Additional Medicare Tax rate is 0.9 percent.
  • Income Subject to Tax.  The tax applies to the amount of certain income that is more than a threshold amount.  You base your threshold amount on your filing status. If you are married and file a joint return, you must combine your spouse’s wages, compensation or self-employment income with yours. Use the combined total to determine if your income exceeds your threshold. The threshold amounts are: 
Filing Status
Threshold Amount
Married filing jointly
Married filing separately
Head of household
Qualifying widow(er) with dependent child
  • Withholding/Estimated Tax. Employers must withhold this tax from your wages or compensation when they pay you more than $200,000 in a calendar year. If you are self-employed you should include this tax when you figure your estimated tax liability.
  • Underpayment of Estimated Tax.  If you had too little tax withheld, or did not pay enough estimated tax, you may owe an estimated tax penalty. For more on this, see Publication 505, Tax Withholding and Estimated Tax.

Additional IRS Resources:

From IRS