How additional Medicare tax works

The arithmetic is a threshold test followed by one multiplication. Wages of $250,000 against a $200,000 threshold leave $50,000 of excess, and 0.9 percent of $50,000 is $450.

The first $200,000 is untouched by this particular tax. That is worth stating plainly because surcharges are often described in a way that suggests the whole amount is re-rated once a line is crossed, which is not how this one works.

Regular Medicare tax applies to every dollar of wages with no upper limit, unlike Social Security tax, which stops at a wage base. The additional Medicare tax is a second layer on top of that, applying only to the part above the threshold.

So a high earner pays the base rate on everything and the base rate plus 0.9 percent on the slice above the line. How FICA works sets out the underlying payroll taxes, and the paycheck calculator shows where they land on a single pay period.

An employer starts withholding the surcharge once wages with that employer pass a fixed amount, and it does not know about your filing status, your spouse's income or a second job. Two spouses each earning below the withholding point can still be over a joint threshold, and a single filer can have the surcharge withheld and then reconciled at filing.

That is why the tax is settled on the return rather than at the payroll. Over-withholding comes back; under-withholding is due. Running the number yourself in advance is the way to avoid meeting it as a surprise.

This is the threshold test and the 0.9 percent charge, computed exactly from the wages and threshold you enter. Investment income has a separate surcharge with its own rules, which the NIIT calculator handles, and how NIIT works explains. The additional Medicare calculator runs the wage-side identity, and the self-employment tax calculator covers earnings that arrive without an employer. This is educational material, not financial advice.