Instructions for Form 8959, Additional Medicare Tax
This resource provides a clear path for taxpayers to determine their liability for the Additional Medicare Tax and correctly report it using Form 8959.
The Additional Medicare Tax is a specific tax levied on higher earners to help fund the nation’s Medicare program. This tax is calculated at a rate of 0.9% and applies only to earned income that surpasses certain government-defined thresholds. It is a distinct calculation from the standard Medicare tax that is withheld from every employee’s paycheck.
Determining if You Owe the Tax
Whether you are subject to the Additional Medicare Tax depends on your filing status and your income level. For individuals with a filing status of Married Filing Jointly, the threshold is $250,000. For those who are Married Filing Separately, the threshold is $125,000. All other filing statuses—Single, Head of Household, and Qualifying Widow(er)—share a threshold of $200,000.
The tax applies to specific types of earned income once those thresholds are exceeded. The first category is Medicare wages, shown in Box 5 of your Form W-2, which includes your regular salary, bonuses, and tips. Your employer is responsible for withholding the standard Medicare tax on these wages, but they only begin withholding the Additional Medicare Tax after your wages exceed $200,000 in a calendar year, regardless of your filing status.
A second category of income subject to this tax is net earnings from self-employment, calculated on Schedule SE, Self-Employment Tax. The tax is applied to the amount of your net earnings that, when combined with any Medicare wages you may have, exceeds your filing status threshold. It is important to note that a loss from self-employment does not reduce your Medicare wages for the purpose of this calculation.
The final type of income is Railroad Retirement Tax Act (RRTA) compensation. This income is reported to you on forms issued by the Railroad Retirement Board. Unlike with wages and self-employment income, RRTA compensation is compared separately against the filing status thresholds and is not combined with other earnings.
Information Required to Complete Form 8959
To complete Form 8959, you must gather several documents. The primary document for most taxpayers is Form W-2, Wage and Tax Statement, which you receive from your employer. You will also need to know the amount of any Additional Medicare Tax that your employer may have already withheld, which is sometimes reported on your Form W-2.
If you have income from self-employment, you will need your completed Form 1040, Schedule SE, Self-Employment Tax. You will need your net earnings from self-employment from Schedule SE. For individuals who receive retirement benefits from the railroad system, the necessary information is found on forms provided by the Railroad Retirement Board.
How to Calculate and Report the Tax Using Form 8959
The calculation of the Additional Medicare Tax is performed directly on Form 8959, which is structured into five parts to handle different income sources. You will attach the completed form to your main tax return, such as Form 1040.
Part I is for calculating the tax on Medicare wages. You begin by entering your total Medicare wages and then determine the amount of wages subject to the tax. This amount is multiplied by 0.9% (0.009) to calculate the tax for this portion of your income.
Part II addresses self-employment income. Here, you will use your net earnings from Schedule SE. The form instructs you to combine these earnings with your Medicare wages to see if the total exceeds your filing status threshold. The portion of your self-employment income above the threshold is then multiplied by 0.9% to find the tax amount.
Part III is for Railroad Retirement Tax Act (RRTA) compensation. This income is entered and compared separately against your filing status threshold, and the amount exceeding the threshold is multiplied by 0.9% to calculate the tax.
Part IV calculates your total Additional Medicare Tax. You will sum the tax liabilities from Part I, Part II, and Part III on line 18. This total is then carried over and reported on line 11 of Schedule 2 (Form 1040), where it is added to your other tax liabilities.
Finally, Part V is for Withholding Reconciliation. In this section, you account for any Additional Medicare Tax already withheld by your employer to determine the final amount you owe or have overpaid.