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Business is good. Your consulting practice cleared well into six figures, or your W-2 salary plus your side business pushed your household over a line you did not know existed. Then your return shows a new form, Form 8959, and a tax you never budgeted for.
That is the Additional Medicare Tax. It is only 0.9%, but because nobody withholds it from self-employment income, it tends to show up as a surprise balance due.
Where the tax comes from
IRC Section 1401(b)(2) imposes, in addition to the regular self-employment taxes, a tax equal to 0.9% of self-employment income above a threshold, for taxable years beginning after December 31, 2012. The thresholds depend on filing status:
| Filing status | Threshold |
|---|---|
| Married filing jointly | $250,000 |
| Married filing separately | $125,000 |
| All other filers | $200,000 |
These dollar amounts are written into the statute itself, and Section 1401(b)(2) does not include an inflation adjustment. Unlike the Social Security wage base, they do not move each year.
There is a parallel tax on wages for employees under IRC Section 3101(b)(2). The two work together, which is where people get tangled up.
How wages and self-employment income combine
Section 1401(b)(2)(B) coordinates the two taxes. Your threshold for self-employment income is reduced, but not below zero, by the wages you received that were taken into account for the wage version of the tax. The IRS states the rule plainly in its questions and answers on this tax: Medicare wages and self-employment income are combined to determine whether you exceed the threshold, and you reduce the threshold for your filing status by your Medicare wages, but not below zero.
Two practical consequences follow.
- A side business can push you over even if your job does not. If you are single, earn $180,000 in W-2 wages, and have $50,000 of net earnings from self-employment, your self-employment threshold drops to $20,000. You owe 0.9% on the $30,000 above it.
- A self-employment loss does not help. The IRS says a self-employment loss is not considered for purposes of this tax. You cannot use a losing side business to reduce wages that are over the threshold.
Worked examples
Example 1: a single consultant with no wages
Dana is single and has $300,000 of Schedule C net profit. Her net earnings from self-employment, after the 92.35% step in IRC 1402(a)(12), are $277,050. The amount above her $200,000 threshold is $77,050. Her Additional Medicare Tax is $77,050 x 0.9% = about $693.45.
Example 2: a married couple with a job and a side business
Chris earns $230,000 in W-2 wages. Pat has $60,000 of net earnings from self-employment. They file jointly. Their combined threshold is $250,000.
- Wages first: $230,000 is below the $250,000 joint threshold, so no Additional Medicare Tax on wages.
- Self-employment threshold: $250,000 minus $230,000 of wages leaves $20,000.
- Pat's self-employment income above that: $60,000 minus $20,000 = $40,000.
- Additional Medicare Tax: $40,000 x 0.9% = $360.
Neither spouse alone is anywhere near $200,000 of self-employment income. Together, they owe the tax.
The threshold is a household number when you file jointly. Your withholding is not.
Why nobody withholds it for you
On the wage side, IRC Section 3102(f) tells an employer to withhold the 0.9% only on wages it pays you in excess of $200,000, and lets the employer disregard your spouse's wages. Your employer does not know about your side business and does not care about your filing status. In Example 2, Chris's employer withholds nothing for this tax because Chris is under $200,000 of wages from that employer.
On the self-employment side, there is no employer at all. That is why the tax shows up as a balance due.
How it is reported
You figure the Additional Medicare Tax on Form 8959, Additional Medicare Tax, and carry it to your Form 1040. The IRS says Form 8959 is required if you owe the tax or if your employer withheld it.
It is not part of the deduction for half
When you pay regular self-employment tax, IRC Section 164(f) lets you deduct one-half of it in figuring adjusted gross income. The statute expressly excludes the tax imposed by Section 1401(b)(2). The 92.35% computation in Section 1402(a)(12) likewise uses the regular rates without the 0.9%. So the Additional Medicare Tax is a straight cost with no offsetting deduction. For the regular calculation, see how self-employment tax is calculated.
How to plan for it
The IRS guidance gives you two tools. If you expect to owe the Additional Medicare Tax and do not have enough withholding, you should make estimated tax payments, request additional income tax withholding on Form W-4, or both.
Two details from that guidance matter:
- You cannot designate an estimated payment specifically for the Additional Medicare Tax. Payments go against your total tax.
- You cannot ask an employer to withhold the 0.9% specifically. But extra income tax withholding requested on Form W-4 is applied against your total tax, including this one.
For a two-earner household with a business, the cleanest fix is often extra withholding on the W-2 job, because withholding is treated more favorably than late estimated payments for the underpayment penalty. Our guide on W-2 job plus side gig withholding covers that strategy, and the quarterly estimated tax deadlines cover the other route.
Married filing separately is the trap
Look at the table again. The married filing separately threshold is $125,000, which is half of the joint threshold. Couples sometimes file separately for other reasons, such as keeping one spouse's tax problems away from the other. That can be the right call. Just know that a self-employed spouse filing separately reaches the Additional Medicare Tax at a much lower number than a single filer does, and the other spouse's wages are not part of that separate computation.
Run the numbers both ways before you choose a filing status. The Additional Medicare Tax is usually not the deciding factor, but it belongs in the comparison.
A note on the 2026 numbers
Because the Additional Medicare Tax thresholds are fixed while incomes rise, more self-employed people reach them each year. The Social Security wage base, by contrast, rose from $176,100 for 2025 to $184,500 for 2026. If your self-employment income is above the wage base, the 12.4% Social Security tax stops, but the 2.9% Medicare tax continues and the 0.9% Additional Medicare Tax may stack on top of it. High earners notice that their self-employment tax rate drops above the wage base. It does not drop to zero.
Frequently asked questions
What are the Additional Medicare Tax thresholds for self-employed people?
Under IRC 1401(b)(2), the 0.9% tax applies to self-employment income above $250,000 for married couples filing jointly, $125,000 for married filing separately, and $200,000 for everyone else. The thresholds are reduced by any Medicare wages you received, but not below zero.
Does a self-employment loss reduce the Additional Medicare Tax on my wages?
No. The IRS states that a self-employment loss is not considered for purposes of this tax. If your wages exceed the threshold, a losing side business does not lower the Additional Medicare Tax on those wages.
Is the Additional Medicare Tax deductible?
No. IRC 164(f) allows a deduction for one-half of self-employment tax but expressly excludes the tax imposed by Section 1401(b)(2). The 0.9% Additional Medicare Tax on self-employment income is not part of that deduction.
How do I pay the Additional Medicare Tax if no one withholds it?
Through estimated tax payments, extra income tax withholding requested on Form W-4 from a job, or both. You cannot earmark a payment for this specific tax, but payments and withholding are applied against your total tax, including the Additional Medicare Tax figured on Form 8959.
This guide is general information about federal tax law, not legal advice for your situation. Reading it does not create an attorney-client relationship.