What Is the Medicare Excess Tax and Who Pays It?

The Additional Medicare Tax is a 0.9% surcharge on wages and self-employment income above $200,000 for single filers or $250,000 for married couples filing jointly, and the employee pays all of it with no employer match.¹ It has applied since 2013, created by the Affordable Care Act, and it sits on top of the standard 1.45% Medicare tax you already pay on earned income.² The thresholds are fixed by statute and have never been indexed for inflation, so more workers cross the line each year as wages rise.³

Who Owes It and at What Income

The 0.9% applies only to the dollars above the threshold for your filing status. The thresholds are $200,000 for single filers, heads of household, and qualifying surviving spouses; $250,000 for married couples filing jointly; and $125,000 for married individuals filing separately.¹

A single filer earning $240,000 pays the 0.9% on the $40,000 above the $200,000 line, adding $360 to the year’s tax bill. A married couple filing jointly with $300,000 in combined wages pays on $50,000, adding $450. If you sit under your threshold, you owe nothing extra.

What Income Triggers the Tax

The surcharge reaches income already subject to standard Medicare tax: W-2 wages, salary, tips, and taxable non-cash compensation such as the imputed cost of employer-provided group-term life insurance above $50,000.⁴ Net earnings from self-employment count too, calculated on Schedule SE.⁵ Railroad workers pay the same rate on compensation subject to the Railroad Retirement Tax Act, though RRTA compensation and FICA wages are measured separately when testing the threshold rather than combined.

Investment income does not count. Dividends, interest, capital gains, and rental income fall outside the Additional Medicare Tax entirely. Those categories may instead be reached by the separate 3.8% Net Investment Income Tax, which is a different tax with its own rules.

Why Your Paycheck Withholding May Be Wrong

Your employer must begin withholding the extra 0.9% once your wages from that single job pass $200,000 in the calendar year, and it keeps withholding through year-end.² That trigger is mechanical. Your employer does not know your filing status, your spouse’s earnings, or what you make at a second job. It watches the $200,000 line for you at that job, and nothing else.

The result is a set of predictable mismatches:

Two-earner married couples where neither spouse individually crosses $200,000 but their combined wages exceed $250,000. Nothing gets withheld, yet tax is owed on the excess.¹
Married filing separately with wages between $125,000 and $200,000. The employer sees no reason to withhold, but the filer’s threshold is only $125,000.
A single high earner with wages of $300,000. The employer withholds on the $100,000 above $200,000, which matches the actual liability.

Whatever your employer withholds is folded into Box 6 of your W-2 alongside the regular Medicare tax. You reconcile the difference when you file, using Form 8959 to calculate the actual liability on wages, self-employment income, and any RRTA compensation, then comparing that total to what was withheld.⁶ The result carries to Schedule 2 of Form 1040.⁷ Over-withholding becomes a credit; under-withholding becomes a balance due.

Self-Employment Income

If you’re self-employed, your net earnings are subject to the 0.9% once your total income crosses the threshold. Where it gets tricky is mixed income. When you have both W-2 wages and self-employment income, wages fill the threshold first, and the 0.9% applies to any self-employment income above whatever room remains.⁸

Take a joint filer with $230,000 in wages and $60,000 of net self-employment income. The wages consume $230,000 of the $250,000 joint threshold, leaving $20,000 of room. The first $20,000 of self-employment earnings is sheltered, and the remaining $40,000 is taxed at 0.9%, adding $360.

One quirk hits self-employed filers harder than it looks. The regular half-of-SE-tax deduction against adjusted gross income exists because employees and employers split standard Medicare and Social Security taxes; self-employed individuals pay both halves and get to deduct one.⁹ The 0.9% surcharge has no employer half to begin with, so none of it is deductible. You pay the full amount out of pocket, and it does not reduce your AGI.

How to Pay It Without a Penalty

The IRS expects the tax to be paid through the year, not settled up in April. If your employer is not withholding enough, the two ways to close the gap are extra paycheck withholding or quarterly estimated payments.

On Form W-4, Step 4(c) lets you add a flat dollar amount to each pay period’s withholding. The IRS specifically recommends this route for workers subject to the Additional Medicare Tax. Technically the extra withholding is booked against income tax, but it lands in the same pot and offsets any liability on your return.¹⁰ Self-employed individuals, whose entire liability sits outside employer withholding, should build it into quarterly estimated payments on Form 1040-ES.¹¹

To sidestep an underpayment penalty, your total withholding and estimated payments for the year generally need to reach at least 90% of your current-year tax or 100% of last year’s tax. If your prior-year AGI was above $150,000 ($75,000 if married filing separately), that safe harbor rises to 110% of last year’s tax.¹² The IRS Tax Withholding Estimator accounts for the Additional Medicare Tax and can flag a shortfall before it becomes a bill.¹³

Not the Same as the Net Investment Income Tax

The Affordable Care Act created a companion tax that shares the same income thresholds and gets confused with this one constantly. The 3.8% Net Investment Income Tax hits investment income: interest, dividends, capital gains, rental income, and passive business income.¹⁴ The 0.9% Additional Medicare Tax hits earned income. The two never touch the same dollar, but a high earner with a large portfolio can owe both in the same year.¹⁵

1
Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
2
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
3
Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
4
Internal Revenue Service. Group-Term Life Insurance
5
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
6
Internal Revenue Service. Instructions for Form 8959 (2025)
7
Internal Revenue Service. Form 8959 – Additional Medicare Tax
8
Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
9
Internal Revenue Service. Topic No. 554, Self-Employment Tax
10
Internal Revenue Service. Employee’s Withholding Certificate Form W-4 2026
11
Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals
12
Internal Revenue Service. Estimated Tax
13
Internal Revenue Service. Tax Withholding Estimator FAQs
14
Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
15
Internal Revenue Service. Topic No. 559, Net Investment Income Tax