Hitting the threshold on
Q. In a recent item (SBTS, December 2015), you talk about the 2.35% Medicare tax. Isn’t there a threshold for this tax? D.B., via email
A. Yes. As opposed to the standard Medicare tax withholding of 1.45% on all your wages, the additional 0.9% Medicare tax, which was created by the Affordable Care Act (ACA), applies to wages above $200,000 for an unmarried taxpayer or $250,000 for a joint-filing married couple (based on the combined wages of both spouses). For example, if you are unmarried and earn $275,000, the additional 0.9% Medicare tax will be withheld on the last $75,000 of your wages. The standard 1.45% Medicare tax will be withheld on the entire $275,000, and the 6.2% Social Security tax will be withheld on the first $118,500 of wages.
Tip: The $200,000/$250,000 threshold for the additional 0.9% Medicare tax isn’t indexed for inflation.
Roth IRAs accept cash only
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