Form 8959 Explained: Additional Medicare Tax made simple

The US tax code is complicated enough without extra forms, but if you’re a high earner or self-employed, you’ve probably encountered Form 8959.

This form is essential for reporting the Additional Medicare Tax, a tax that applies once your income crosses certain thresholds.

If you’re unsure how to complete Form 8959 or how it applies to your situation – especially as an expat – this guide has you covered.

We’ll walk through everything you need to know, step by step, to make filing this form straightforward.

What is the Additional Medicare Tax?

The Additional Medicare Tax is a 0.9% tax that applies to high earners. It was introduced under the Affordable Care Act to help fund Medicare and only applies to income above specific thresholds based on your filing status.

Here are the thresholds:

• Single or head of household: $200,000
• Married filing jointly: $250,000 (combined income)
• Married filing separately: $125,000

This tax applies to wages, self-employment income, and railroad retirement income (RRTA compensation) that exceed the thresholds.

Key point

Employers are required to withhold this tax from wages exceeding $200,000, but they don’t consider your filing status or additional income.

This means you might owe more tax (or qualify for a refund) when you file your return.

That’s where Form 8959 comes into play.

Who needs to file Form 8959?

You’ll need to file Form 8959 if:

1. Your wages, self-employment income, or railroad compensation exceeds the thresholds.
2. You and your spouse file jointly, and your combined income exceeds $250,000.
3. You’re self-employed and owe both the employer and employee portions of Medicare taxes on income above the threshold.

For expats, foreign-earned income may also impact your liability. While the Foreign Earned Income Exclusion (FEIE) reduces your taxable income, it does not exempt income from the Additional Medicare Tax calculation.

How to complete Form 8959: Step-by-step instructions

Form 8959 is divided into three parts, and each serves a specific purpose in calculating the Additional Medicare Tax.

To make it easier, let’s break it down with examples and expert tips.

Form 8959 preview

 

 

Part I: Wages, RRTA Compensation, and Tips

This section is for reporting wages, tips, and railroad retirement income (RRTA compensation) that exceed the threshold for your filing status.

Example:

• You’re single, and your total wages for the year are $230,000.
• The threshold for single filers is $200,000, so you only report $30,000 (the amount over the threshold) in this section.

Pro tip: Use your W-2 form to find your wages (Box 1) and any Medicare tax withheld (Box 6). Double-check that the figures match! If you worked multiple jobs, combine the wages from all W-2s before calculating the excess.

Part II: Self-Employment Income

Here, you’ll report your net self-employment income and determine how much of it exceeds the threshold for your filing status.

Example:

• You’re married filing jointly, and your self-employment income is $270,000.
• The threshold for married filing jointly is $250,000, so you only report $20,000 (the amount over the threshold).

Pro tips:

1. Use Schedule SE to calculate your net self-employment income.
2. Unlike Social Security tax, the Additional Medicare Tax only applies to the employee portion of Medicare tax. Make sure to calculate carefully!

Part III: Total Additional Medicare Tax

This is where you determine the total tax owed or claim a refund if too much was withheld. Add the amounts from Parts I and II to calculate your Additional Medicare Tax liability.

Example:

• From Part I, you reported $30,000 (wages over the threshold).
• From Part II, you reported $20,000 (self-employment income over the threshold).
• Combine these to get $50,000 in taxable income subject to the Additional Medicare Tax.
• Multiply this by 0.9% (0.009):
  $50,000 x 0.009 = $450 Additional Medicare Tax.

Pro tip: If your employer withheld more than $450 in Additional Medicare Tax, you can claim a refund on your tax return. Review your W-2 to see how much was already withheld.

Quick summary table for filing

Pro tip: If you expect to owe Additional Medicare Tax, consider making estimated tax payments throughout the year to avoid penalties.

Special Considerations for Expats

For US expats, foreign income and tax treaties may complicate the calculation.

While the FEIE excludes up to $120,000+ of foreign-earned income (for 2025), the IRS still requires you to include all income for purposes of determining the Additional Medicare Tax.

Pro tip: Consult a tax professional to ensure compliance and avoid double taxation, as expats often face unique challenges when filing Form 8959.

Employer withholding vs. actual tax liability

If your wages exceed $200,000, your employer will automatically withhold the Additional Medicare Tax.

However:

• If you’re married filing jointly, your combined income may exceed $250,000, leaving you with additional tax liability.
• If you’re below the threshold for your filing status, you may qualify for a refund.

Use Form 8959 to reconcile the amount withheld with your actual liability when filing your tax return.

What About Self-Employed Individuals?

Self-employed individuals are responsible for calculating and paying both the employee and employer portions of Medicare taxes.

The Additional Medicare Tax applies only to the employee portion on income above the threshold.

To calculate:

1. Use Schedule SE to determine your self-employment income.
2. Transfer the relevant figures to Form 8959.
3. Pay the Additional Medicare Tax alongside your regular self-employment taxes.

Bottom line: Final tips

• Double-check thresholds: Ensure you’ve accurately calculated whether your income exceeds the thresholds.
• Keep documentation: Maintain W-2s, tax forms, and records of foreign income.
• Consult a professional: Taxes for Expats has 20+ years of experience helping expats navigate complex US tax requirements, including Form 8959.