Sunday, January 06, 2013
Much ink has been spilled about how wage earners are getting a 2% haircut in their take-home pay. This arises from the failure of the new tax bill to extend the temporary 2% cut in employees’ share of social security tax.
What is not often mentioned is that high earners will also be subject to an additional 0.9% Medicare surtax. This additional levy will apply to wage earners and those earning self-employment income once total earnings exceed $200,000 for single persons and heads of household, and $250,000 for married couples filing jointly. Employers will start to withhold once wages go over the threshold. This tax was part of the health care law in 2010, but its effective date was deferred until 2013.
This tax is in addition to the 3.8% Medicare surtax on net investment income, which also begins this year.