Additional Medicare Tax
Also known as: 0.9 percent Medicare surtax, ACA Medicare surtax
A 0.9% federal surtax on wages, self-employment income, and railroad retirement compensation above filing-status thresholds ($200,000 single / $250,000 MFJ / $125,000 MFS). Enacted by the Affordable Care Act in 2010. Thresholds are not indexed for inflation.
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The Additional Medicare Tax was added to the Internal Revenue Code by the Affordable Care Act in 2010, effective for tax years 2013 onward. It is a 0.9% surtax that applies on top of the standard 1.45% Medicare tax already withheld via FICA payroll. The surtax applies to wages (W-2 box 5), self-employment income, and railroad retirement compensation, with separate filing-status thresholds: $200,000 for single filers and heads of household, $250,000 for married filing jointly, and $125,000 for married filing separately. Critically, the thresholds are NOT indexed for inflation — the same nominal dollar figures have applied since enactment, while wages have grown 30-40% over the same period, pulling more workers into surtax exposure each year.
The structural mechanics: only the employee side of FICA includes the Additional Medicare Tax (the employer does not match the 0.9% as they match the standard 1.45% Medicare). Employers are required to withhold the surtax on any individual employee's wages above $200,000 regardless of the employee's filing status, with the actual liability reconciled at year-end on Form 8959 against the household's filing-status-specific threshold. The result: married filing jointly couples with one high-earner often have over-withholding (employer withheld at the $200K trigger but the actual MFJ threshold is $250K), refunded with the regular Form 1040 refund. Two-earner married couples often have under-withholding (neither spouse individually hit $200K, so no surtax was withheld, but combined wages exceed $250K).
The Additional Medicare Tax is a companion to the Net Investment Income Tax (NIIT), also enacted by the ACA at the same thresholds and also not indexed. The two surtaxes are designed as a pair: one on wages and self-employment income (Additional Medicare), one on investment income (NIIT). For high-income households, both surtaxes typically apply — Additional Medicare on W-2 wages or SE income, NIIT on dividends, interest, and capital gains. Combined, the two surtaxes add 4.7% (0.9% + 3.8%) to the marginal federal rate on income above the thresholds.
Planning around the Additional Medicare Tax: any above-the-line adjustment (Schedule 1 Part II items) that reduces AGI can also reduce the surtax exposure if it brings the household near or under the filing-status threshold. The traditional 401(k) contribution does NOT reduce FICA wages (and therefore does not reduce the Medicare base on which the surtax is computed), but it does reduce AGI, which interacts with the related NIIT MAGI threshold. The most direct planning lever for Additional Medicare specifically is timing of bonus or commission income — pushing variable income into a lower-wage year, or splitting it across years, can reduce the total wages subject to surtax.
- FICA payroll taxes: the 7.65% on every US paycheck, explained FICA breaks down to 6.2% Social Security up to the wage base, 1.45% Medicare with no cap, plus a 0.9% surtax over $200k. What each line on your stub means.
- What Line Is AGI on Form 1040? Line 11 (2024 & 2025) On the 2024 and 2025 Form 1040, AGI is line 11 — line 9 (total income) minus line 10 (Schedule 1 adjustments). Line by line, with a worked example.
- Self-employment tax 2026: how Schedule SE computes the 15.3% Schedule SE applies 15.3% (12.4% Social Security + 2.9% Medicare) to 92.35% of net earnings. See the wage-base cap and the half-SE-tax deduction.
- FICA (Federal Insurance Contributions Act) The combined Social Security (6.2%) and Medicare (1.45%) tax withheld from W-2 wages by employers, matched by an equivalent employer contribution. For 1099 self-employed income, the same tax appears as 15.3% self-employment tax on Schedule SE.
- NIIT (Net Investment Income Tax) A 3.8% federal surtax on investment income for higher-income filers, enacted in 2013 to fund the Affordable Care Act. Applies on top of regular capital gains and dividend tax when modified AGI exceeds $200,000 (single) or $250,000 (married filing jointly). Thresholds are not indexed for inflation.
- MAGI (Modified Adjusted Gross Income) MAGI is your AGI with specific deductions and exclusions added back in. The exact items added back depend on which tax provision is testing eligibility — there is no single universal MAGI. The two most commonly encountered versions are the IRA-deduction MAGI and the Premium Tax Credit MAGI.
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