What is the Additional Medicare Tax and when does it apply?

• A. 0.9% Additional Medicare Tax on wages above threshold amounts; employee pays; not matched by employer.
• B. 0.9% tax paid by employer on all wages.
• C. 0.9% to be withheld from employee only if self-employed.
• D. 0.9% tax on tips only.

Answer: (C)

The Additional Medicare Tax is a 0.9% extra Medicare tax on wages, compensation, and self-employment income that exceed certain filing-status thresholds. For employees, the employer withholds this 0.9% from the portion of wages above the applicable threshold, and the employer does not pay or match this amount. The threshold levels depend on filing status (for example, higher thresholds for married filing jointly). It isn’t charged on all wages—only the portion over the threshold. It isn’t a tax paid by the employer on all wages, and it isn’t limited to tips. If you’re self-employed, you don’t have employer withholding; you pay the additional tax as part of your self-employment tax on income above the threshold. In short, it’s a 0.9% extra Medicare tax on wages above the threshold, withheld from the employee, with no employer match.