Beginning with the year 2013 an additional medicare tax of .9% apples to the salaries of high earners. The tax applies to annual wages over $200,000.00 for individuals; $250,000.00 for joint returns and $125,000.00 for married individuals filing separate returns. The law imposes this tax on the employee not the employer. An employer is required to withhold the additional tax for employees that he pays more than $200,000.00 a year, but this withholding obligation will not cover many situations, where the employee has tax liability.
Example: Judy works as a plastic surgeon for a local hospital and in 2014 earns $175,000.00 a year. Her husband Jim works as an estate planning lawyer for a large law firm for a salary in 2014 of $150,000.00 a year. Since neither one of them earns more than $200,000.00 a year their employers will not withhold the additional .9% medicare tax. However, since their combined salaries exceed the thresh hold by $75,000.00 they will owe an additional medicare tax of $675.00 which they will have to submit, when they file their annual 1040 tax return.
Self employed individuals are also liable for the .9 % additional medicare tax on their earned income which exceeds the limits.
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