The Medicare Tax is an additional 0.9% in tax an individual or couple must pay on income thresholds above $200,000 for singles and $250,000 for couples. People who owe this tax should file Form 8959, with their tax return. Let’s look at how to calculate Additional Medicare Tax properly.
Full Answer
What is the Medicare tax rate for a single person?
The standard Medicare tax is 1.45% if someone is an employee or 2.9% if a person is self-employed. Single tax filers earning above $200,000, or $250,000 for married couples, pay the 0.9% additional Medicare tax.
What has the IRS issued about the additional Medicare tax?
The IRS has issued proposed re g ulations regarding the additional 0.9% Medicare tax that can be relied on until final regulations are published. It has also issued a set of frequently asked questions (FAQs) that are not authoritative guidance but do provide insight into how the IRS plans to administer the new tax.
Can NETnet income be less than zero for additional Medicare tax?
Net self-employment income can't be less than zero for purposes of calculating the Additional Medicare Tax, so business losses can't reduce the tax owed on wage compensation. The Additional Medicare Tax also applies to Railroad Retirement Tax Act compensation for employees and employee representatives.
What is the “regular” Medicare tax under the Affordable Care Act?
Income up to a threshold amount is subject to the “regular” Medicare tax. Under the Affordable Care Act, taxpayers who earn above a set income level (depending on filing status) pay 0.9% more into Medicare on top of the regular contribution.
How does the 0.9% Medicare tax work?
The extra tax was announced as part of the Affordable Care Act and is known as the Additional Medicare Tax. The tax rate for the Additional Medicare Tax is 0.9 percent. That means you'll pay 2.35 percent if you receive employment wages. Self-employed taxpayers will pay 3.8 percent.
Who is subject to additional Medicare tax withholding?
Additional Medicare Tax withholding applies only to wages paid to an employee that are in excess of $200,000 in a calendar year. Withholding rules for this tax are different than the income tax withholding rules for supplemental wages in excess of $1,000,000 as explained in Publication 15, section 7. Example.
What is the additional Medicare tax threshold amount for single taxpayers?
$200,000If you are a high earner, you are subject to the 0.9% additional Medicare tax on earned income in excess of the threshold amount. The threshold amounts are based on your filing status: Single, head of household, or qualifying widow(er) — $200,000. Married filing jointly — $250,000.
What is the additional Medicare tax for 2020?
The FICA tax rate, which is the combined Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent, remains 7.65 percent for 2020 (or 8.55 percent for taxable wages paid in excess of the applicable threshold).
What income is subject to the 3.8 Medicare tax?
The tax applies only to people with relatively high incomes. If you're single, you must pay the tax only if your adjusted gross income (AGI) is over $200,000. Married taxpayers filing jointly must have an AGI over $250,000 to be subject to the tax.
How is the additional Medicare tax calculated?
What is the additional Medicare tax? The additional Medicare tax of 0.9% applies only to higher wage earners. It is paid in addition to the standard Medicare tax. An employee will pay 1.45% standard Medicare tax, plus the 0.9% additional Medicare tax, for a total of 2.35% of their income.
What is the additional Medicare tax for 2021?
0.9%2021 updates. 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return). (Code Sec. 3101(b)(2))
What's a Medicare surtax?
The net investment income tax, also known as the “unearned income Medicare contribution surtax,” is an additional 3.8% tax applied to net investment income as of 2021. Like the additional Medicare tax, there is no employer-paid portion.
What is the additional Medicare tax for 2022?
0.9%2022 updates 2.35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return).