2022 Instructions for Schedule 8812  2022 Internal Revenue Service

The federal government sets a limit on how much of your income is subject to the Social Security tax. For 2024, the Social Security tax limit is $168,600 (up from $160,200 in 2023). The maximum amount of Social Security tax an employee will have withheld from their paycheck in 2024 will be $10,453.20 ($168,600 x 6.2%). TaxFormFinder has an additional 774 Federal income tax forms that you may need, plus all federal income tax forms. If an individual owes the net investment income tax, the individual must file Form 8960.

If an employee’s withholding is miscalculated and they are owed a refund, the employee must request the refund directly from the IRS. Don’t attempt to give the employee a refund or adjust the employee’s withholding on a miscalculation of federal income tax or FICA tax. The Social Security portion is taxed at 6.2% on earnings up to the maximum taxable amount, while the Medicare portion is taxed at 1.45%.

RRTA compensation should be separately compared to the threshold. Workers pay Social Security taxes to support government programs in society. Social Security benefit payments issued by the government to retired individuals are funded using the aid of Social Security tax payments from current workers.

  • People who are self-employed must also pay the standard Medicare tax.
  • You’ll only have to pay the additional tax if your income surpasses a specific threshold.
  • All wages that are currently subject to Medicare Tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual’s filing status.
  • The Net Investment Income Tax is separate from the Additional Medicare Tax, which also went into effect on January 1, 2013.
  • If you (and your spouse if filing a joint return) didn’t have Medicare wages, skip Part I and go to Part II.

Some religious groups that openly oppose Social Security benefits may claim a religious exemption. Non-resident aliens may be exempt depending on their type of visa. In 2023, the maximum taxable amount is up to $160,200 of income ($168,600 in 2024). Up to this amount, an employee is responsible for 6.2% of Social Security taxes and the employer is responsible for 6.2% of Social Security taxes. Self-employed individuals are responsible for both portions of the tax. The first applies to individuals younger than retirement age and the other applies to individuals who reach FRA during that year.


However, the annual increases may not be sufficient to sustain the program in future years. It isn’t wise to rely on Social Security to be your only source of income in retirement if you can save more. Many tax-advantaged savings accounts are available to build an additional nest egg. We last updated the Additional Medicare Tax in December 2022,
so this is the latest version of Form 8959, fully updated for tax year 2022. You can download or print current or past-year PDFs of Form 8959 directly from TaxFormFinder.

  • If one person earns $80,000 in wages, and the second person earns $250,000, their combined total wages are $330,000.
  • Additional information on how to withhold tax on taxable noncash fringe benefits is available in Publication 15 (Circular E), section 5, and Publication 15-B, section 4.
  • If an individual owes the net investment income tax, the individual must file Form 8960.

You will claim credit for any withheld Additional Medicare Tax against the total tax liability shown on your individual income tax return (Form 1040 or 1040-SR). An individual will owe Additional Medicare Tax on wages, compensation and self-employment income (and that of the individual’s spouse if married filing jointly) that exceed the applicable threshold for the individual’s filing status. Medicare wages and self-employment income are combined to determine if income exceeds the threshold. A self-employment loss is not considered for purposes of this tax. RRTA compensation (which does not include non-qualified stock options granted to RR employees) is separately compared to the threshold. To the extent Additional Medicare Tax isn’t withheld by your employer, you must pay the tax.

About 99 percent of Medicare beneficiaries do not have a Part A premium since they have at least 40 quarters of Medicare-covered employment. Net self-employment income can’t be less than zero for purposes of calculating the Additional Medicare Tax, so business losses can’t reduce the tax owed on wage compensation. D has $150,000 in wages and E has $175,000 in self-employment income.

To avoid paying the extra net investment income tax and additional medicare tax, your goal should be to earn less than $200,000 as an individual or $250,000 as a couple. Therefore, $26,868 is subject to an additional 3.8% tax, or $1,021. The individual has already paid roughly $50,000 in federal income taxes (~20% effective tax rate), along with an additional $14,000 (~5% effective tax rate) in California state income taxes already. A surtax is an additional tax imposed by the government on something already taxed. Typically, a surtax is charged on taxpayer incomes higher than a certain level at which normal income tax is paid. It can be calculated as a percentage of a certain amount or a flat dollar rate.

If you anticipate that you will owe Additional Medicare Tax for 2023 but won’t satisfy the liability through withholding, you may need to make estimated tax payments. You should consider your estimated total tax liability in light of your wages, compensation, and self-employment income and the threshold amount for your filing status when determining whether estimated tax payments are necessary. Any estimated tax payments you make will apply to any and all taxes on your tax return, including any Additional Medicare Tax. You can’t designate any estimated tax payments specifically for Additional Medicare Tax. Depending upon your filing status, wages, RRTA compensation, and self-employment income, you may owe more than the amount that was withheld by your employer.

Who deducts the standard Medicare tax?

For individuals with a salary above these thresholds, the employer withholds the additional 0.9%. The additional Medicare tax of 0.9% applies only to higher wage earners. If you have a simple tax return, you can file for free yourself with TurboTax Free Edition, or you can file with TurboTax Live Assisted Basic or TurboTax Live Full Service Basic at the listed price. You’ll use IRS Form 8959 to calculate your Additional Medicare Tax. This form will reconcile any additional Medicare withholdings you’ve had with what you owe, and you’ll report the amount on IRS Form 1040.

Additional Medicare Tax Withholding Rate

Therefore, Don’s employer didn’t withhold Additional Medicare Tax. However, Don is liable for Additional Medicare Tax on $75,000 of wages ($200,000 in wages minus the $125,000 threshold for a married filing separately return). In addition, the $200,000 of wages reduces the self-employment income threshold to $0 ($125,000 threshold minus the $200,000 of wages).

What Is the Maximum Taxable Amount for Social Security Taxes?

Social Security and Medicare taxes will still come out of their checks, though. The amount of Medicare withholding may not be the amount an individual must pay, Employers must withhold the 0.9% tax on income over $200,000 for the year, even if the tax withheld is higher or lower than the amount due. You must keep records of amounts of the additional Medicare tax withheld from employee pay and that you owe to the IRS as an employer. These amounts must be paid along with all other payroll tax payments. To calculate your additional Medicare tax liability, you’ll need Form 8959 when filing for your tax return. The IRS has instructions for Form 8959 available to help you file correctly.

Noncash wages and RRTA compensation are subject to Additional Medicare Tax withholding, if, in combination with other wages, or with other compensation in the case of RRTA compensation, they exceed the $200,000 withholding threshold. An employer is responsible for withholding the Additional Medicare Tax from wages or railroad retirement (RRTA) compensation it pays to an employee in excess of $200,000 in a calendar year, without regard to filing status. An employer must begin withholding Additional Medicare Tax in the pay period in which the wages or railroad retirement (RRTA) compensation paid to an employee for the year exceeds $200,000. The employer then continues to withhold it each pay period until the end of the calendar year.

Get your max refund

Under both situations, most workers are required to contribute Social Security taxes up to IRS limits. Any income you earn beyond the wage cap amount is not subject to a 6.2% Social Security payroll tax. For example, an employee who earns $170,000 in 2023 will pay $9,932.40 in Social Security taxes ($160,200 x 6.2%). If an individual has too little withholding or fails to pay enough quarterly estimated taxes to also cover the Net Investment Income Tax, the individual may be subject to an estimated tax penalty. Named the Additional Medicare Tax, it adds an additional 0.9% tax on top of the 1.45% employees have to pay. Employers are not required to match the amount and the employee is responsible for the entire amount of the extra tax.

Use Schedule 8812 (Form 1040) to figure your child tax credit (CTC), credit for other dependents (ODC), and additional child tax credit (ACTC). Medicare Open Enrollment for 2022 began on October 15, 2021, and ends on December 7, 2021. During this time, people eligible for Medicare can compare 2022 coverage options between Original Medicare, and Medicare Advantage, and Part D prescription drug plans. Medicare health and drug plan costs and covered benefits can change from year to year, so people with Medicare should look at their coverage choices annually and decide on the options that best meet their health needs. A person who is self-employed will pay 2.9% standard Medicare tax, and an additional Medicare tax of 0.9%, for a total of 3.8%.

Tips are subject to Additional Medicare Tax withholding, if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold. All RRTA compensation that is currently subject to Medicare Tax is subject to Additional Medicare Tax if it is paid in excess of the applicable threshold for an individual’s filing status. All FAQs that discuss the application of the Additional Medicare Tax to wages also apply to RRTA compensation, unless otherwise indicated.

Knowing how it’s calculated, along with what the additional tax pays for, can help you understand the functionality and reasoning behind the additional Medicare tax. There are no special rules for Additional Medicare Tax for nonresident aliens and U.S. citizens living abroad. Wages, RRTA compensation, gross pay vs net pay: whats the difference and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. Regardless of the amount of your Medicare Part B premium next year, you’ll get some help paying the bills if you also receive Social Security.