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Form 8959 instructions

2023 Instructions for Form 8959 Instructions for Form 8959, Additional Medicare Tax-2025

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The document provides instructions for Form 8959, which is used to calculate the Additional Medicare Tax owed by individuals based on their income exceeding specific threshold amounts. It outlines the purpose of the form, who must file it, and details about income types subject to this tax. The document includes updates for 2023, reminders regarding Form W-2, and examples illustrating how to determine tax liability. It also explains the filing process and necessary calculations for both Medicare wages and self-employment income.

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Who pays the 3.8% Medicare surtax?

A Medicare surtax of 3.8% is charged on the lesser of (1) net investment income or (2) the excess of modified adjusted gross income over a set threshold amount. The threshold is $250,000 for joint filers, $125,000 for married filing separately, and $200,000 for all other filers.

How do I get out of paying Medicare tax?

Investment income: As mentioned above, if you stop earning income at a job or as a self-employed individual, and start earning your income from investments alone, you will no longer be liable for paying the Medicare tax because only earned income is subject to this tax.

Why am I being charged Medicare Surtax?

An individual will owe Additional Medicare Tax on wages, compensation and self-employment income (and that of the individuals spouse if married filing jointly) that exceed the applicable threshold for the individuals filing status.

How do I avoid paying 3.8% Medicare surtax?

Look for ways to minimize your AGI. The lower your AGI (the number at the bottom of the TAX-FORM 1040) the lower the amount of your income will be subject to the 3.8% surtax. Need another reason to contribute to your retirement plan? Making contributions to your 401k, 403b or pension will lower your AGI.

At what income level does the 3.8 surtax kick in?

The threshold is $250,000 for joint filers, $125,000 for married filing separately, and $200,000 for all other filers. Net investment income includes the following items of income reduced by applicable expenses: interest, dividends, capital gains, annuities, royalties, and passive rental and business income.

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What is the additional Medicare tax on Form 8959?

If you are filing Form 8959, you must file one of the forms listed earlier. Additional Medicare Tax. A 0.9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount.

How is additional Medicare tax paid?

Your employer will begin withholding the additional Medicare tax once your wages reach a certain amount. Your filing status isnt important for this. Withholding starts when your wages and other compensation are more than $200,000 for the year.