Additional Medicare Tax on Form 8859

[SCswede]

A main taxpayer has earnings over the $200k medicare W/H threshold and has add'l medicare W/H properly withheld from their paycheck and included in their W-2. Spouse has self employment earnings and properly completes Sch C and has self employment social security (12.4%) and medicare taxes (2.9%) calculated on Sch SE-S and included on Schedule 2. On Sch 8959 Part I, the main taxpayer actual additional medicare tax is properly calculated based on the $250K medicare threshold. On Sch 8959 Part II, the spouses self employment income from Sch SE-S is also subjected to the additional Medicare Tax (.9%).

Why would her self employment earnings be subjected to additional Medicare Tax?

Any input is appreciated.

[AmyC]

Your MFJ status and income coming from both wages and self-employment create the issue. It is well explained in What Is Form 8959: Additional Medicare Tax - TurboTax - Intuit which states:

The Additional Medicare Tax only applies to the portion of your employment, self-employment and railroad retirement earnings that exceed the income thresholds for your filing status. You can find these thresholds in the instructions for Form 8959.

For tax year 2024, for example, if you are married and filing jointly, the tax only applies to income that exceeds $250,000 in combined earnings. On the other hand, if you were married filing separately, you could end up owing more tax, because the threshold is only $125,000.

[SCswede]

Thanks Amy; after posting my message I did some more digging and found the same information as you have posted here. While I now understand the reason, MFJ as the guiding criteria for the Additional Medicare Tax does not logically make sense to me. A self employed person MFJ filing a Sch C is already paying self employment taxes of 12.4% for social security and 2.9% for medicare on their self employed earnings and to then pay an additional .09% of additional medical taxes because the spouses earnings exceed the $250k threshold seems illogical to me. 🤔 Thanks again Amy.

[KeshaH]

It's because the additional Medicare tax is based on joint income and both taxpayers are subject to the extra tax if their income is over the threshold.