IRS Instruction 8959 – IRS Forms, Instructions, Pubs 2026 – If you’re a high-income earner, you might be subject to the Additional Medicare Tax, a 0.9% levy on certain wages, self-employment income, and Railroad Retirement Tax Act (RRTA) compensation above specific thresholds. This tax, introduced under the Affordable Care Act, helps fund Medicare programs and is calculated using IRS Form 8959. In this SEO-optimized guide, we’ll break down the instructions for Form 8959, explain who needs to file it, detail the calculation process, and provide step-by-step filing tips for the 2025 tax year. Whether you’re dealing with Medicare wages over $200,000 or combined income with a spouse, understanding these rules can help you avoid penalties and ensure accurate tax reporting.
What Is Additional Medicare Tax?
The Additional Medicare Tax is an extra 0.9% tax applied to your Medicare wages, RRTA compensation, and self-employment income once they exceed certain income thresholds based on your filing status. Unlike the standard 1.45% Medicare tax (which has no wage base limit), this additional rate kicks in only for high earners to support Medicare funding.
Key points include:
- It applies to wages subject to Medicare tax, self-employment earnings, and RRTA compensation.
- Employers must withhold this tax on Medicare wages or RRTA compensation exceeding $200,000 in a calendar year, regardless of your filing status.
- Self-employment income is taxed similarly, but losses don’t reduce the threshold.
- The tax is in addition to the regular Medicare tax rate, bringing the total Medicare tax on excess amounts to 2.35% for employees (or 3.8% for self-employed individuals, including the standard self-employment tax).
This tax doesn’t have an employer match, meaning only the employee or self-employed individual pays the additional 0.9%.
Who Must File Form 8959?
Not everyone needs to file Form 8959—only those whose income triggers the Additional Medicare Tax. According to IRS guidelines, you must file if:
- Your Medicare wages and tips (from Form W-2, box 5) on any single W-2 exceed $200,000.
- Your RRTA compensation (Form W-2, box 14) on any single W-2 exceeds $200,000.
- Your total Medicare wages, tips, and self-employment income (combined with your spouse’s if filing jointly) exceed the threshold for your filing status.
- Your total RRTA compensation (combined with your spouse’s if filing jointly) exceeds the threshold.
Even if no additional tax is owed but your employer withheld it, you should file Form 8959 to claim a credit. Medicare wages include amounts from Form W-2 (box 5), unreported tips from Form 4137, and uncollected taxes from Form 8919. Self-employment income comes from Schedule SE, Part I, line 6 (ignoring negatives).
For nonresident aliens or U.S. citizens living abroad, the rules generally apply the same way—no special exemptions.
Additional Medicare Tax Thresholds for 2025
The thresholds for Additional Medicare Tax are not adjusted for inflation and depend on your filing status. Here’s a breakdown:
| Filing Status | Threshold Amount |
|---|---|
| Married filing jointly | $250,000 |
| Married filing separately | $125,000 |
| Single | $200,000 |
| Head of household | $200,000 |
| Qualifying surviving spouse | $200,000 |
Note: For married couples filing jointly, combine both spouses’ incomes to check against the threshold. RRTA compensation is evaluated separately from wages and self-employment income.
How to Calculate Additional Medicare Tax?
Calculating the tax involves comparing your income to the threshold and applying the 0.9% rate to the excess. Form 8959 is divided into parts for different income types:
- Part I: Additional Medicare Tax on Medicare Wages – Add up wages, unreported tips, and uncollected taxes; subtract the threshold; multiply the excess by 0.009.
- Part II: Additional Medicare Tax on Self-Employment Income – Enter self-employment income; reduce the threshold by any Medicare wages (but not below zero); multiply the excess by 0.009.
- Part III: Additional Medicare Tax on RRTA Compensation – Similar to Part I, but for RRTA amounts; no reduction from other income types.
- Part IV: Total Additional Medicare Tax – Sum the taxes from Parts I-III and report on your tax return.
- Part V: Reconciliation of Withholding – Add up withheld amounts and transfer to your Form 1040 withholding line.
If you have both wages and self-employment income, the wages reduce the self-employment threshold. Employers withhold based on the $200,000 limit per job, which may lead to over- or under-withholding depending on your total income or multiple employers.
Step-by-Step Instructions for Filling Out Form 8959
Follow these steps to complete Form 8959 accurately:
- Enter Basic Info: Match your name and SSN to your tax return.
- Part I (Lines 1-7): Input Medicare wages (line 1), unreported tips (line 2), uncollected wages (line 3). Total on line 4, subtract any chapter 11 bankruptcy deduction (line 5), enter excess over threshold (line 6), and calculate tax (line 7 = line 6 × 0.009).
- Part II (Lines 8-13): Enter self-employment income (line 8), deduct half the self-employment tax if applicable (line 9), adjust threshold for wages (lines 10-12), and calculate tax (line 13).
- Part III (Lines 14-17): For RRTA, sum compensation (line 14), subtract deductions (line 15), enter excess (line 16), and calculate tax (line 17).
- Part IV (Line 18): Total tax from lines 7, 13, and 17; report on Schedule 2 (Form 1040), line 11.
- Part V (Lines 19-24): Reconcile regular Medicare withholding (lines 19-22) and Additional Medicare Tax withheld (line 23); total on line 24 for your return’s withholding.
Attach Form 8959 to Form 1040, 1040-SR, 1040-NR, or 1040-SS.
Examples of Additional Medicare Tax Scenarios
To illustrate:
- Single Filer with Self-Employment: $220,000 income. Tax on $20,000 excess = $180.
- Single with Wages and Self-Employment: $130,000 wages + $145,000 self-employment. Wages reduce self-employment threshold to $70,000; tax on $75,000 = $675.
- Married Filing Jointly with Wages: Combined $325,000 wages. Tax on $75,000 excess = $675.
- No Tax Due: Incomes below thresholds or non-combined types like wages + RRTA under separate limits result in $0 tax.
Filing Tips and Common Questions
- Missing W-2: Request a replacement from your employer; file by April 15, 2026, even without it.
- Underpayment: Use Form W-4 for extra withholding or Form 1040-ES for estimated payments to avoid penalties (check with Form 2210).
- Recent Updates for 2025: Thresholds remain unchanged; instructions dated August 7, 2025, with reminders for U.S. territory forms like W-2PR.
For more details, consult IRS Publication 505 or a tax professional.
Conclusion
Navigating IRS Instruction 8959 and Form 8959 doesn’t have to be overwhelming. By understanding the Additional Medicare Tax thresholds, calculations, and filing requirements for 2025, you can ensure compliance and potentially minimize your tax liability. Always use official IRS sources for the most accurate information, and consider consulting a tax advisor for personalized advice. If your income approaches these limits, proactive planning—like adjusting withholdings—can help you stay ahead.