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What is Additional Medicare Tax?

Author:
Harold Averkamp, CPA, MBA

Definition of Additional Medicare Tax

The Additional Medicare Tax is one of the U.S. government’s payroll withholding taxes that is paid solely by employees and the self-employed. In other words, the employer does not match the Additional Medicare Tax. The Additional Medicare Tax is 0.9% (0.009) of an employee’s gross pay (wages, salaries, bonuses, etc.) that are in excess of $200,000 during a calendar year.

The Additional Medicare Tax is in addition to the (regular) Medicare payroll tax and the Social Security payroll tax.
Related: What is the difference between Social Security and Medicare payroll taxes?

Example of Additional Medicare Tax

Sam is employed by Jones Corporation and had gross pay of $300,000 during the year. In addition to the regular Medicare tax (and the Social Security tax), Sam must pay the Additional Medicare Tax. In Sam’s case, the Additional Medicare Tax is 0.9% of $100,000 (Sam’s gross pay of $300,000 minus $200,000) which amounts to $900. The $900 is withheld from Sam’s gross pay and is remitted by Jones Corporation to the U.S. Treasury.

Difference between the regular Medicare Tax and Additional Medicare Tax

The regular Medicare tax is withheld from an employee’s gross pay without limit at the rate of 1.45% of gross pay. In our example, Sam’s regular Medicare tax for the year is $4,350 ($300,000 X 0.0145). Jones Corporation must match the regular Medicare tax withholding and therefore must remit $8,700 ($4,350 + $4,350) in regular Medicare tax to the U.S. Treasury.

The Additional Medicare Tax is paid only by Sam through payroll withholding. Jones Corporation does not match the Additional Medicare Tax and remits the $900 that was withheld from Sam’s gross pay. Information on the Additional Medicare Tax can be found at www.irs.gov.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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