Accounting and Tax Services
Jan 10

Details on the Additional Medicare Tax

When does Additional Medicare Tax start?

Additional Medicare Tax applies to wages and compensation above a threshold amount received after December 31, 2012 and to self-employment income above a threshold amount received in taxable years beginning after December 31, 2012.

What is the rate of Additional Medicare Tax?

The rate is 0.9 percent.

When are individuals liable for Additional Medicare Tax?

An individual is liable for Additional Medicare Tax if the individual's wages, compensation, or self-employment income (together with that of his or her spouse if filing a joint return) exceed the threshold amount for the individual's filing status:

• Married filing jointly: $250,000
• Married filing separately: $125,000
• Single: $200,000
• Head of household (with qualifying person): $200,000
• Qualifying widow(er) with dependent child: $200,000

What wages are subject to Additional Medicare Tax?

All wages that are currently subject to Medicare Tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. For more information on what wages are subject to Medicare Tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15, (Circular E), Employer's Tax Guide.

Will Additional Medicare Tax be withheld from an individual's wages?

An employer must withhold Additional Medicare Tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual's filing status or wages paid by another employer. An individual may owe more than the amount withheld by the employer, depending on the individual's filing status, wages, compensation, and self-employment income. In that case, the individual should make estimated tax payments and/or request additional income tax withholding using Form W-4, Employee's Withholding Allowance Certificate.

About Reed Tinsley, CPA

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