Additional Medicare Tax
In this article, we will explore the Additional Medicare Tax, who must pay it, and whether it is deductible, and answer some frequently asked questions about the topic.
Contents
The Additional Medicare Tax is a tax on earned income implemented as part of the Affordable Care Act in 2013. This tax is in addition to the regular Medicare tax. It applies to certain individuals who earn more than a certain threshold. The tax aims to help fund the Medicare program, which provides health insurance to individuals aged 65 and older, certain younger people with disabilities, and those with End-Stage Renal Disease.
The Additional Medicare Tax is a 0.9% tax on earned income and the regular Medicare tax of 1.45%. This means that individuals subject to the Additional Medicare Tax pay a total Medicare tax of 2.35% on earned income over a certain threshold. The Additional Medicare Tax applies only to individuals who earn more than a certain amount.
Who Must Pay Additional Medicare Tax?
Not everyone is subject to the Additional Medicare Tax. The tax applies only to individuals whose income exceeds a certain threshold. The threshold for the Additional Medicare Tax depends on an individual’s filing status:
- Married filing jointly: The threshold is $250,000.
- Married filing separately: The threshold is $125,000.
- Single: The threshold is $200,000.
- Head of household: The threshold is $200,000.
- Qualifying widow(er) with dependent child: The threshold is $200,000.
If an individual’s earned income exceeds the threshold for their filing status, they are subject to the Additional Medicare Tax. Earned income includes wages, salaries, and self-employment income.
Additional Medicare Tax Deduction
The Additional Medicare Tax deduction is an itemized deduction that can be claimed on your federal income tax return. It allows you to reduce your taxable income by the additional Medicare tax you paid during the tax year. To claim the Additional Medicare Tax deduction, you must itemize your deductions on Schedule A of Form 1040. You can only claim the deduction if you paid Additional Medicare Tax on your wages, compensation, or self-employment income.
The deduction is subject to certain limitations, which depend on your filing status and income level. For example, if you are married filing jointly, the deduction is limited to the additional Medicare Tax you paid on your joint income above $250,000. It’s important to note that the Additional Medicare Tax deduction is not available for employers or self-employed individuals who pay the tax on behalf of their employees. Only the individual who actually paid the tax can claim the deduction.
FAQs
What is the purpose of the Additional Medicare Tax?
The Additional Medicare Tax aims to help fund the Medicare program, which provides health insurance to individuals aged 65 and older, certain younger people with disabilities, and those with End-Stage Renal Disease.
How is the Additional Medicare Tax calculated?
The Additional Medicare Tax is calculated as 0.9% of earned income exceeding an individual’s filing status threshold.
Do employers have to pay the Additional Medicare Tax?
Employers are responsible for withholding the Additional Medicare Tax from an employee’s wages if the employee’s wages exceed $200,000 in a calendar year.
Do self-employed individuals have to pay the Additional Medicare Tax?
Self-employed individuals are responsible for paying both the employee and employer portion of the Additional Medicare Tax. The tax is calculated on their net earnings from self-employment.
