High-wage earners pay more than the standard tax payment for Medicare on their individual income tax returns each year. If you employ highly compensated employees, you must ensure you correctly withhold Medicare taxes. The Additional Medicare Tax is an extra 0.9% on earned income above a specific threshold limit.
The Affordable Care Act (ACA) created the Additional Medicare Tax in 2013. It helps fund certain parts of the ACA, including premium tax credits (PTC). PTCs help lower-income Americans afford health insurance coverage through the individual Marketplace.
In this article, we’ll explain how the tax works, the 2026 income thresholds, and what employers must know about withholding.
In this blog post, you'll learn:
Medicare is a federal health insurance program. All employee and employer taxable wages are subject to the standard Medicare tax.
This includes several types of income, such as:
Self-employment income is also subject to the tax.
The standard Medicare tax rate is 2.9%1:
The standard tax primarily funds Medicare Part A, which covers hospital insurance for seniors and certain individuals with disabilities. According to ValuePenguin2, 88% of Medicare Part A funding came from payroll taxes in 2025.
While Medicare is in its name, the Additional Medicare Tax goes toward the ACA, not Medicare Part A. This helps millions of Americans get the financial help they need when purchasing an individual health insurance plan on the ACA marketplaces.
High-income earners subject to the Additional Medicare Tax pay an additional 0.9% tax on earnings beyond a set applicable threshold. There is no employer match for the additional 0.9%. This is an important distinction for HR and payroll teams. While employers must withhold the tax, it does not increase employer payroll costs.
A person is liable for the Additional Medicare Tax if their wages, RRTA compensation, and/or self-employment income exceed the applicable tax threshold for their filing status.
According to the Internal Revenue Service3 (IRS), there are no special rules for nonresident aliens and U.S. citizens living abroad.
|
Tax-filing status |
2026 income threshold |
Additional Medicare tax rate |
|
Married filing a joint return |
$250,000 |
0.9% |
|
Married filing separate returns |
$125,000 |
0.9% |
|
All other filers, including single taxpayers |
$200,000 |
0.9% |
It's important to note that the additional withholding of 0.9% tax only applies to taxable income in excess of the applicable threshold amount, whether for single or joint filers. For example, if a self-employed single filer earns $250,000 in a year, they would pay 2.9% on the first $200,000 of their earnings, then 3.8% (2.9% + 0.9%) on the remaining $50,000.
Employers aren't subject to the Additional Medicare Tax. However, they must withhold the additional 0.9% for employees who earn more than $200,000 in a calendar year. An employer who fails to withhold the Additional Medicare Tax is liable for it unless the employee later pays the tax. Even if not liable for the tax, the IRS4 states that an employer who doesn't meet withholding, deposit, reporting, and tax payment responsibilities for the Additional Medicare Tax may be subject to other applicable penalties.
There's no requirement that an employer notify an employee of the tax on wages, and they can't honor an employee's request to cease withholding it from payroll taxes. There's also no employer match for the Additional Medicare Tax.
Also, while the One Big Beautiful Bill Act introduced income tax deductions for employees’ qualified overtime compensation, it doesn’t apply to payroll taxes. Therefore, overtime pay is still subject to Medicare taxes.
This is the most common area of confusion.
Employers must begin withholding the 0.9% Additional Medicare Tax once an employee’s wages exceed $200,000 in a calendar year.
This rule applies:
Employers can't:
An employee’s real tax obligation depends on their total wages and filing status.
For example:
Because neither spouse exceeds $200,000 in income with their employer, neither employer withholds tax. However, the couple still owes 0.9% on $50,000 when filing their return. They calculate and pay this using Form 89595.
On the other hand, if an employee earns $225,000 but files jointly and their household income is below $250,000, the employer will withhold once wages exceed $200,000. That employee may receive a credit when filing their return.
In addition to the standard Medicare tax, high-income earners pay an additional 0.9% on wages exceeding specific IRS thresholds. While the tax is based on an employee’s total income and filing status, employers must begin withholding once wages they pay exceed $200,000 in a calendar year, regardless of marital status or household income.
Understanding the difference between the employer withholding trigger and an employee’s actual tax liability can help reduce payroll errors and prevent surprises at tax time.
Employers who follow proper withholding and reporting rules can stay compliant while avoiding unnecessary penalties.
This blog article was originally published on January 20, 2014. It was last updated on March 3, 2026.