Chapter 28

Additional Medicare Taxes

Higher-income taxpayers may be subject to two new taxes starting in 2013, one on earned income and one on investment income. Both taxes were enacted as part of the 2010 health care reform legislation but did not become effective until 2013.

An Additional Medicare Tax of 0.9% applies to wages, other employee compensation, and self-employment income to the extent such income exceeds a threshold of $250,000 for married persons filing jointly, $200,000 if single, head of household, or a qualifying widow/widower, or $125,000 if married filing separately. Figure liability for the additional tax on Form 8959. If the tax was withheld from your 2013 wages, you show the amount on Form 8859 and add it to your regular withholdings on Form 1040. See 28.2 for details on the 0.9% tax.

A 3.8% tax applies to some or all of your net investment income if your modified adjusted gross income exceeds the applicable threshold of $250,000 for joint filers and qualifying widows/widowers, $200,000 if single or head of household, or $125,000 if married filing separately. The 3.8% tax is figured on Form 8960. See 28.3 for details on the 3.8% tax.

In your planning for 2014, you may need to increase your withholdings or estimated tax installments to account for the new taxes.

28.1 Additional Medicare Taxes Take Effect ...

Get J.K. Lasser's Your Income Tax 2014: For Preparing Your 2013 Tax Return now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.