Medicare Tax Increase Under PPACA
Provisions under the Patient Protection and Affordable Care Act (PPACA ) provide for an increase in FICA taxes for certain individuals. Effective January 1, 2013, there will be a Medicare Tax increase by .9% for high-income individuals defined as those earning annually more than $200,000 individually, $250,000 if married filing jointly, or $125,000 if married filing separately. Employers must withhold the additional Medicare tax on wages they pay to an employee in excess of $200,000. The employer’s share of Medicare tax is not increased.
Also, there will be an additional 3.8% tax on the unearned income of high-income individuals. The thresholds are the same as defined above. The tax will be equal to 3.8% of the lesser of the net investment income for a taxpayer’s taxable year or the modified adjusted gross income for such taxable year.
For more information on the Medicare Tax, click here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax.