What Is the Medicare Surtax: The 0.9% and 3.8% Taxes

The Medicare surtax is shorthand for two separate taxes that hit higher earners: a 0.9% Additional Medicare Tax on wages and self-employment income above certain thresholds, and a 3.8% Net Investment Income Tax on investment earnings above those same thresholds.¹² Both took effect on January 1, 2013, under the Affordable Care Act.³ You can owe one, the other, or both in the same year, but never on the same dollar of income.

Who Pays and at What Income

Both taxes use the same dollar thresholds, tied to filing status. These figures have not been adjusted for inflation since 2013, so more households cross them each year as wages climb.⁴

Married filing jointly: $250,000
Married filing separately: $125,000
Single, head of household, or qualifying surviving spouse: $200,000

Only the dollars above your threshold are taxed. A single filer earning $230,000 in wages owes the 0.9% Additional Medicare Tax on $30,000 of it, not on the whole paycheck.⁵

The 0.9% Tax on Wages and Self-Employment Income

The Additional Medicare Tax covers three kinds of earned income: W-2 wages subject to Medicare tax, net self-employment earnings, and Railroad Retirement compensation.⁴ It sits on top of the regular 1.45% Medicare tax, so on the employee side the total Medicare rate becomes 2.35% on earnings above your threshold.¹ Interest, dividends, capital gains, and rental income are not subject to this tax — they belong to the other surtax described below.

If you have both wages and self-employment income, the IRS runs the calculation in a specific order so no dollar counts twice. First, apply the 0.9% tax to any wages over your threshold. Then reduce your threshold by your total Medicare wages, but not below zero. Whatever remains is the threshold that applies to your self-employment income.⁵

Here is how that works. A single filer with $130,000 in wages and $145,000 in self-employment income doesn’t cross the $200,000 wage threshold. But the self-employment threshold shrinks by the $130,000 in wages to just $70,000, so the 0.9% tax applies to $75,000 of self-employment income, or $675. A self-employment loss doesn’t offset wages in this calculation; it’s treated as zero.⁵

The 3.8% Net Investment Income Tax

The Net Investment Income Tax (NIIT) applies a 3.8% rate to investment earnings and uses the same filing-status thresholds as the 0.9% tax. You owe the NIIT on the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds your threshold.² Modified AGI adds back any foreign earned income exclusion; if you haven’t claimed that exclusion, MAGI and AGI are the same number.⁶

Net investment income generally includes interest, dividends, capital gains, rental and royalty income, and certain annuity payments. Income from a business you actively run is excluded, but income from a passive activity — a business you own without materially participating in it — counts.⁶ That trips up some real estate investors and silent business partners.

Several categories stay outside the NIIT: tax-exempt municipal bond interest, distributions from IRAs and other qualified retirement plans, and the portion of a home sale gain already excluded under the primary residence rules.²

Why Paycheck Withholding Often Misses

Your employer must start withholding the extra 0.9% from the paycheck that pushes your year-to-date wages past $200,000. That trigger applies regardless of your filing status, because your employer doesn’t know whether you’re married or what other income you have.⁵

That flat rule creates mismatches in both directions. A married couple filing jointly doesn’t actually owe the tax until combined wages top $250,000, so a spouse earning $210,000 alone will see withholding on $10,000 the couple may not owe. Form 8959 reconciles the overpayment on your return.⁵

The other direction is riskier. Two spouses earning $160,000 each will see no additional withholding from either employer, because neither paycheck crosses $200,000. Their combined $320,000 exceeds the $250,000 joint threshold by $70,000, leaving a $630 bill nobody collected. Anyone working two jobs faces the same gap when no single employer pays more than $200,000.⁵

Covering the Shortfall

If you expect to owe surtax that withholding won’t cover, you have two options. You can send quarterly estimated payments using Form 1040-ES, or you can raise your income tax withholding on Form W-4. You can’t ask your employer to withhold extra specifically for the Additional Medicare Tax, but any additional income tax withholding you request applies against your total tax bill on the return, including surtax owed.⁵

Estimated payments are generally required if you expect to owe at least $1,000 in total tax after withholding and refundable credits.⁷ The 2026 quarterly deadlines are April 15, June 15, and September 15, 2026, and January 15, 2027.

Reporting the Surtax on Your Return

The two taxes use two different forms. Report the 0.9% Additional Medicare Tax on Form 8959, which runs the calculation separately for wages, self-employment income, and RRTA compensation. The form pulls Medicare wages from box 5 of your W-2 and Medicare tax withheld from box 6, and pulls self-employment income from Schedule SE.⁸ The total from line 18 of Form 8959 flows to Schedule 2, line 11. Any Additional Medicare Tax your employer withheld goes on Form 1040, line 25c, combined with your federal income tax withholding.⁹

Report the 3.8% NIIT separately on Form 8960.¹⁰ If you have high wages and significant investment earnings in the same year, expect to file both. Form 8959 is also how you claim back over-withholding when your individual wages triggered the 0.9% withholding but your household income stayed below the joint threshold.⁵

1
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
2
Internal Revenue Service. Net Investment Income Tax
3
Internal Revenue Service. Affordable Care Act Tax Provisions
4
Internal Revenue Service. Topic No. 560, Additional Medicare Tax
5
Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
6
Internal Revenue Service. Topic No. 559, Net Investment Income Tax
7
Internal Revenue Service. 2026 Form 1040-ES – Estimated Tax for Individuals
8
Internal Revenue Service. Form 8959
9
Internal Revenue Service. 2025 Instructions for Form 8959
10
Internal Revenue Service. Instructions for Form 8960