With the new year comes a new set of taxes and the possibility of owing more in taxes than expected. One of the taxes that are often overlooked and often misunderstood is the additional Medicare tax. The Additional Medicare Tax is a 0.9 percent tax imposed on an individual's wages, compensation, and self-employment income in excess of a threshold amount. The threshold amount depends on the individual's filing status. For married taxpayers filing jointly, the threshold amount is $250,000, for married taxpayers filing separately, the threshold amount is $125,000, and for all other taxpayers, the threshold amount is $200,000.
The NIIT (Net Investment Income Tax) is often confused with the additional Medicare tax. The NIIT is a 3.8 percent tax imposed on the lesser of an individual's net investment income or the amount by which their modified adjusted gross income exceeds the same threshold amounts. It is important to understand the difference between the two, as they are two separate taxes.
If you got married in 2022, you can add “tax return” to the list of items that you’ll need to worry about. The same threshold amounts apply to joint returns as they do to individuals, however, if your combined income exceeds the threshold amount, you may be subject to the additional Medicare tax. Anything above that is subject to an additional Medicare tax of 0.9%.
The above payroll tax rates do not include the additional 0.9 percent in Medicare tax paid by highly compensated employees on earnings that exceed the applicable threshold amount. It is important to note that the tax is imposed on the employee and is not generally taken out of the employee’s paycheck. The employer is responsible for withholding the additional Medicare tax from the employee’s wages.
Regardless of the employee's filing status, an employer is required to subtract the Additional Medicare Tax from any wages or railroad retirement compensation that are in excess of the threshold amount. The employer is also required to report the additional Medicare tax that is withheld from the employee’s wages on the employee’s Form W-2.
In the 2022 midterms, voters over age 65 broke for Republican House candidates. However, it is important to remember that there are additional Medicare charges for high earners, such as the additional Medicare tax. It is important to be aware of these charges if you are a high earner as they could potentially increase your tax burden.
Mandatory health spending includes nearly all Medicare spending, and the three largest health-related tax expenditures in FY 2022 were: the exclusion for employer-sponsored health insurance, the exclusion for contributions to health savings accounts, and the deduction for medical expenses. These tax expenditures help reduce the cost of health insurance premiums and out-of-pocket medical expenses, but they also reduce federal revenues.
Note: You may need to withhold additional Medicare tax if you pay an employee more than $200,000 in wages during the year. The employer is responsible for withholding the additional Medicare tax. For 2022, it is $3,650 for you or $7,300 for family coverage.
Los Angeles, CA, March 05, 2023 --(PR.com)-- Some 4.7 million higher-income seniors pay additional premiums surcharges for their Medicare coverage, but they may not be aware of all of the additional Medicare taxes they may be subject to. It is important to understand the additional Medicare taxes that may apply to high earners in order to properly plan for tax time.
In summary, the additional Medicare tax of 0.9 percent applies to individuals with income in excess of the applicable threshold amount. It is important to understand the difference between the NIIT and the additional Medicare tax, as they are two separate taxes. The employer is responsible for withholding the additional Medicare tax from the employee’s wages. Additionally, it is important to be aware of the additional Medicare taxes for high earners in order to properly plan for tax time.