The income threshold depends on the filing status of the taxpayer. Medicare surtax was first introduced in 2010 with the Affordable Care Act of 2010 and applies to investment income. If your modified adjusted gross income is above the given thresholds below, you will pay 3.8 percent Medicare surtax.
What is the medicare surcharge tax?
The Affordable Care Act of 2010 included a provision for a 3.8% "net investment income tax," also known as the Medicare surtax, to fund Medicare expansion. It applies to taxpayers above a certain modified adjusted gross income (MAGI) threshold who have unearned income including investment income, such as: Taxable interest.
What is the Medicare surtax on much of my income?
This is on top of a top 37% Federal Tax Bracket. Taxpayers in the top income brackets are likely to also be subject to an additional 3.8% Medicare Surtax on much of their income. In case you wondered about my politics with this post, here I am with Michelle Obama at the Whitehouse.
What is the Medicare tax under Obamacare?
Under the Patient Protection And Affordable Care Act ("Obamacare"), high income taxpayers are subject to a new Medicare tax on their "unearned income." Here's how it works. 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.
Do I owe the medicare surcharge on investment income?
If you're a high earner, an additional tax could apply to your investment income. The Medicare surtax applies to taxpayers above certain income thresholds. If the surtax applies to you, you'll owe an additional 3.8% tax rate on your investment income.
What is the Medicare surtax for 2021?
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.
What is the 3.8% Medicare surtax?
The Medicare tax is a 3.8% tax, but it is imposed only on a portion of a taxpayer's income. The tax is paid on the lesser of (1) the taxpayer's net investment income, or (2) the amount the taxpayer's AGI exceeds the applicable AGI threshold ($200,000 or $250,000).
What is the Medicare surtax for 2022?
The 2022 Medicare tax rate is 2.9%. Typically, you're responsible for paying half of this total Medicare tax amount (1.45%) and your employer is responsible for the other 1.45%. Your Medicare tax is deducted automatically from your paychecks.
Who pays the 3.8 surtax?
The net investment income tax is a 3.8% tax on investment income that typically applies only to high-income taxpayers. 1 It applies to individuals, families, estates, and trusts, but certain income thresholds must be met before the tax takes effect. Net investment income can be capital gains, interest, or dividends.
At what income does the 3.8 surtax kick in?
There is a flat Medicare surtax of 3.8% on net investment income for married couples who earn more than $250,000 of adjusted gross income (AGI). For single filers, the threshold is just $200,000 of AGI.
How do you calculate Medicare surtax?
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?StatusTax thresholdmarried tax filers, filing separately$125,0003 more rows•Sep 24, 2020
Will Medicare premiums increase in 2022?
In November 2021, CMS announced that the Part B standard monthly premium increased from $148.50 in 2021 to $170.10 in 2022. This increase was driven in part by the statutory requirement to prepare for potential expenses, such as spending trends driven by COVID-19 and uncertain pricing and utilization of Aduhelm™.
How do I avoid Medicare surtax?
Despite the complexity of this 3.8% surtax, there are two basic ways to “burp” income to reduce or avoid this tax: 1) reduce income (MAGI) below the threshold, or 2) reduce the amount of NII that is subject to the tax.
How does 3.8 Obamacare tax work?
Effective Jan. 1, 2013, individual taxpayers are liable for a 3.8 percent Net Investment Income Tax on the lesser of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory threshold amount based on their filing status.
Who pays Medicare surtax?
The Medicare tax rate is 2.9% of your income. If you work for an employer, you pay half of it, and your employer pays the other half — 1.45% of your wages each. If you are self-employed, you are responsible for the full 2.9%.
Does employer pay Medicare surtax?
Additional Medicare Tax applies to an individual's Medicare wages that exceed a threshold amount based on the taxpayer's filing status. Employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual's wages paid in excess of $200,000 in a calendar year, without regard to filing status.