What Is the Additional Medicare Tax?

The Additional Medicare Tax applies to people who make more than a specified income level for the year.

As of 2013, the IRS requires higher-earning taxpayers to pay more into Medicare. 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%. That means you’ll pay 2.35% in Medicare taxes if you receive employment wages. Self-employed taxpayers will pay 3.8%. Incomes from wages, self-employment, and other compensation, including Railroad Retirement (RRTA) compensation, all count toward the income the IRS measures.

If you’re subject to this tax, your employer can withhold it from your paychecks, or you can make estimated payments to the IRS throughout the year.

Does everyone on Medicare have to pay this tax?

While everyone pays some taxes toward Medicare, you’ll only pay the additional tax if you’re at or above the income limits. If you earn less than those limits, you won’t be required to pay any additional tax. If your income is right around the limit, you might be able to avoid the tax by using allowed pre-tax deductions, such as:

• flexible spending accounts (FSA)
• health savings accounts (HSA)
• retirement accounts

But you’ll still need to pay the standard 1.45%. There is no income limit on the standard Medicare tax amount.

Medicare is paid for by taxpayer contributions to the Social Security Administration. Workers pay 1.45% of all earnings to the Federal Insurance Contributions Act (FICA). Employers pay another 1.45%, for a total of 2.9% of your total earnings. Self-employed people pay the entire 2.9% on their own.

The Additional Medicare Tax applies to people who are at predetermined income levels. For the 2024 tax year, those levels are:

• Married taxpayers filing jointly: $250,000 and above
• Married taxpayers filing separately: $125,000 and above
• All other taxpayers: $200,000 and above

Employers are required to withhold the additional 0.9% for employees with salaries that are at or over these income limits. If you have income from other sources that will put you over that limit, you can request that your employer withhold this amount from your checks. Self-employed taxpayers who are at or over the limits need to include this calculation in their estimated tax payments for the year.

When you file taxes, you’ll calculate your Additional Medicare Tax liability for the year. In some cases, you might owe more, and in others, you might have paid too much. Any payment owed or refund adjustment needed will be added to your overall required payment or refund amount.

You’ll be taxed on the amount you make that is above the threshold. You’ll only pay the additional tax on amounts above that limit. For example, if you’re a single tax filer with an employment income of $250,000, you’d pay the standard 1.45% on $200,000 of your income and then 2.35% on the remaining $50,000. So, in this example, you’d pay $4,075 in Medicare taxes for the year.

The Additional Medicare Tax helps to fund some elements of the Affordable Care Act. This includes the premium tax credit and other features. Notably, the Affordable Care Act provided some additional benefits to Medicare enrollees, including:

• lower premiums for Medicare Advantage (Part C) plans
• lower prescription drug costs
• closure of the Part D benefit gap, or “donut hole”
• inclusion of free vaccines
• inclusion of free preventive care services
• inclusion of free screenings for depression, heart disease, diabetes, and some cancers
• increased chronic care management programs

The Additional Medicare Tax helps supplement the cost of these new Medicare benefits.

Help for your taxes if you’re on Medicare

• Taxpayer Assistance Centers (TACs). TACs are staffed with volunteers to help answer your questions.
• Tax Counseling for the Elderly (TCE). TCE centers are available to provide free tax preparation. Call 888-227-7669 or use the IRS locator to find a local center.
• Volunteer Income Tax Assistance (VITA). If you don’t have a local TCE, you may have a nearby VITA center, which also provides free tax help. Call 800-906-988 or use the IRS locator to find help near you.

The Additional Medicare Tax helps fund some of the features of the Affordable Care Act. The regulation has been in place since 2013. Everyone who earns income pays some of that income back into Medicare.

The standard Medicare tax is 1.45%, or 2.9% if you’re self-employed. Taxpayers who earn above $200,000, or $250,000 for married couples, will pay an additional 0.9% toward Medicare.