Additional medicare tax

Definition

The Additional Medicare Tax is a tax imposed on high-income earners to help fund Medicare. It applies to wages, self-employment income, and railroad retirement (RRTA) compensation above certain thresholds.

5 Must Know Facts For Your Next Test

1. The Additional Medicare Tax rate is 0.9%.
2. The threshold for the tax differs based on filing status: $250,000 for married couples filing jointly, $200,000 for single filers, and $125,000 for married individuals filing separately.
3. Employers are required to withhold the Additional Medicare Tax from wages exceeding $200,000 in a calendar year.
4. Self-employed individuals must include this tax when calculating their estimated taxes.
5. Unlike regular Medicare tax, there is no employer match for the Additional Medicare Tax.

Review Questions

• What is the rate of the Additional Medicare Tax?
• At what income level does an employer start withholding the Additional Medicare Tax?
• Is there an employer match for the Additional Medicare Tax?

Related terms

Medicare Tax: A payroll tax that funds the U.S. government’s Medicare program.

FICA Taxes: Federal Insurance Contributions Act taxes that include Social Security and regular Medicare taxes.

Self-Employment Tax: A tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves.