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RSUs and the Additional Medicare Tax

Large RSU vests can push wages over thresholds where additional Medicare tax may apply.

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Large vests increase your wages, and wages above certain IRS thresholds can be subject to an additional Medicare tax on top of the regular Medicare tax. Employers may begin it once your wages with that employer pass a set point, but your final liability depends on your full-year and household income.

Why this happens

Regular Medicare tax applies to all wages: An additional Medicare tax applies to wages and self-employment income above thresholds set by the IRS.

Because vests are wages, a big can push you over those thresholds.

Employer for the additional tax is based on what that single employer pays you, which may not match your household threshold.

Any mismatch between what was withheld and what you owe is reconciled on your tax return.

What to check

  • Whether your wages this year are high enough for the additional tax to apply.
  • Pay stubs and for additional Medicare tax .
  • Your filing status, which affects the household threshold.
  • Whether a spouse's wages push your joint total over the line.
  • How additional Medicare tax differs from net investment income tax (different income types).

Common mistake

Assuming employer for additional Medicare tax exactly matches your liability. It is based on one employer's wages, not your household total, so the return is where it gets trued up.

Example scenario (hypothetical)

Illustration only, not your tax situation.

Example: A dual-income couple each has wages below the per-employer trigger, so little or no additional Medicare tax is withheld, but their combined wages exceed the joint threshold. The additional tax is then calculated and settled on their joint return.

When to get help from a tax pro

  • You and a spouse both have high wages.
  • You changed employers mid-year.
  • You want to understand how this stacks with other surtaxes.
  • You see a balance due tied to Medicare on your return.

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Related pages

For learning, not filing

Grants, employers, and states all differ. Use your own documents and a qualified tax professional before you make decisions from this guide.