HIGH INCOME MEDICARE TAX: EXAMPLE 1
01.Core Concepts
• Carlos, a single filer, has $130,000 in wages and $145,000 in self- employment income. • Carlos’s wages are not in excess of the $200,000 threshold for single filers, so Carlos is not liable for Additional Medicare Tax on these wages. • Before calculating the Additional Medicare Tax on self-employment income, the $200,000 threshold for single filers is reduced by Carlos’s $130,000 in wages, resulting in a reduced self-employment income threshold of $70,000. • Carlos is liable to pay Additional Medicare Tax on $75,000 of self- employment income ($145,000 in self-employment income minus the reduced threshold of $70,000). 11 HIGH INCOME MEDICARE TAX: EXAMPLE 2 • Franklin & Aretha are married and file jointly. Franklin has $150,000 in wages and Aretha has $175,000 in self-employment income. • Franklin’s wages are not in excess of the $250,000 threshold for joint filers, so Franklin & Aretha are not liable for Additional Medicare Tax on Franklin’s wages. • Before calculating the Additional Medicare Tax on Aretha’s self- employment income, the $250,000 threshold for joint filers is reduced by Franklin’s $150,000 in wages resulting in a reduced self- employment income threshold of $100,000. • Franklin & Aretha are liable to pay Additional Medicare Tax on $75,000 of self-employment income ($175,000 in self-employment income minus the reduced threshold of $100,000).