What is the new Medicare tax? Historically the Medicare payroll tax has been 2.9%. It applies only to earned income, which is wages you are paid by an employer, plus tips. You’re responsible for 1.45% of the tax, and it’s deducted automatically from your paycheck. Your employer kicks in the other 1.45%.
Under the new tax provision beginning in 2013, high-wage earners will owe an additional 0.9% on earned income above the thresholds mentioned above. So, for example, if you are an individual filer whose Modified Adjusted Gross Income (MAGI) will be $225,000 in 2013, you will pay a 1.45% Medicare tax on the first $200,000, then 2.35% (1.45% plus 0.9%) on the next $25,000. Your employer will be required to withhold the extra 0.9% once your wages pass the $200,000 threshold for individuals.
Beginning in 2013 the new 0.9% Medicare tax will be applied to wages and self-employment income in excess of $250,000 if married filing jointly and $200,000 if unmarried. If you file quarterly estimated tax payments be sure to include this additional tax in your estimates. Want to learn more?
