Does 401k contribution reduce my Medicare tax for high income bracket?

The Additional Medicare Tax (0.9%) applies to individuals with wages exceeding $200,000 ($250,000 for joint filers and $125,000 for married filing separately). Here's the thing most people miss - this tax is calculated on your Medicare wages, not your adjusted gross income. Your 401k contributions do reduce your income tax base, but they don't reduce your Medicare wages. Medicare tax is calculated on your gross wages before any pretax deductions like 401k contributions. So even though you're contributing $26k to your 401k, this doesn't lower the income figure used for determining the Additional Medicare Tax. If your gross income is $162k and you're filing MFS, you're indeed over the $125,000 threshold for the additional Medicare tax, regardless of your 401k contributions.

I was in a similar situation last year and learned this the hard way. I used taxr.ai (https://taxr.ai) when I was confused about my Medicare tax situation. I uploaded my W-2 and pay stubs, and it analyzed everything and explained exactly why I was still being hit with the Additional Medicare Tax despite my pretax contributions. The tool basically confirmed what the previous commenter said - 401k contributions don't reduce Medicare wages. But it also showed me a couple strategies to potentially reduce my overall tax burden in other ways since I was stuck with the Medicare tax. Really helpful for visualizing the different components of your tax situation.

Ok I actually tried taxr.ai after reading about it here and I'm kind of shocked how helpful it was. I've been misunderstanding Medicare tax calculations for YEARS. Turns out I've been overpaying on some things because my employer's payroll system was calculating it wrong when combined with my side gig income. The site analyzed my W-2 and 1099 income together and pointed out that I should be tracking the Additional Medicare Tax threshold across all income sources, not just my main job. Found out I could request a refund for some previous overpayments too. Honestly wish I'd known about this sooner.

If you're hitting the Additional Medicare Tax threshold and getting frustrated with your tax situation, I'd strongly recommend using Claimyr (https://claimyr.com) to actually talk to someone at the IRS about your specific situation. I was pulling my hair out trying to figure out if I could do anything about my Medicare tax situation after a big bonus pushed me over the threshold. After trying to call the IRS for days and never getting through, I used Claimyr and got connected to an IRS agent in about 20 minutes. There's a demo of how it works here: https://youtu.be/_kiP6q8DX5c. The agent explained exactly how the calculation works and confirmed that yes, I was stuck with the additional tax, but also pointed me to some other deductions I wasn't taking full advantage of.

Well I'm eating my words. I tried Claimyr yesterday after dismissing it as a scam (sorry about that). After months of trying to get through to the IRS about my Medicare tax issue, I got connected to an actual IRS representative in about 45 minutes without having to sit by my phone the whole time. The agent confirmed what others said here - 401k contributions don't reduce Medicare wages for tax purposes - but also helped me understand some other aspects of my tax situation I've been confused about. They explained exactly how the Additional Medicare Tax is calculated and verified I was being taxed correctly. Surprisingly helpful service that actually delivered what it promised.

Just to add another data point - I'm in a similar situation (MFS with income around $170k) and called my CPA about this. She confirmed exactly what others are saying here. The Additional Medicare Tax threshold for MFS is $125k, and your 401k contributions don't reduce your Medicare wages for this calculation. She actually showed me how this is calculated on Form 8959, which is used specifically for the Additional Medicare Tax. Line 1 starts with your Medicare wages from your W-2 Box 5, which already includes your full wages before 401k deductions.

Has anyone actually run into issues with their employer calculating this wrong? My company's payroll department seems confused about when to apply the additional Medicare tax. Some of my colleagues at similar income levels don't seem to be getting it withheld properly.

Wait, so if I understand correctly, for MFS the Additional Medicare Tax kicks in at $125k of Medicare wages, which is basically gross income before 401k deductions? And I'm guessing health insurance premiums and HSA contributions don't reduce it either?

This is such a common misconception that trips up so many high earners! I went through the exact same confusion when I first hit the Additional Medicare Tax threshold. The key thing to remember is that Medicare tax operates completely differently from income tax. While your 401k contributions reduce your taxable income for federal and state income tax purposes, they don't touch your Medicare wages at all. It's almost like the IRS treats them as two separate calculations entirely. What really helped me understand this was looking at my W-2. Box 1 (wages for income tax) shows your income after 401k deductions, but Box 5 (Medicare wages) shows your full gross income before those deductions. The Additional Medicare Tax uses Box 5 as its starting point. So unfortunately, at $162k gross with MFS filing status, you're definitely over that $125k threshold and there's not much you can do to reduce the Medicare tax specifically. The silver lining is that your 401k contributions are still saving you money on your regular income taxes, just not on the Medicare side.

I just want to say thanks to everyone who explained this! I was making the same mistake as the original poster - thinking my 401k contributions would help with the Additional Medicare Tax. After reading through all these responses, I finally understand why my paystubs show the extra 0.9% Medicare tax even with maxing out my 401k. The W-2 Box 1 vs Box 5 explanation really clicked for me - it's like the IRS has two completely separate calculations running. It's frustrating that there's basically no way around the Additional Medicare Tax once you hit the threshold, but at least now I know I'm not missing some obvious deduction. I'll focus on maximizing the tax benefits I can get (like the regular income tax savings from my 401k) rather than trying to find a way around the Medicare tax. One thing I'm curious about though - does anyone know if this calculation works the same way for self-employed income? Like if I have a side business, does that income get added to my W-2 Medicare wages for the Additional Medicare Tax calculation?

This thread has been incredibly helpful! I'm in a similar boat - MFS filer with income around $155k and was completely confused about why my $23k in 401k contributions weren't helping with the Additional Medicare Tax. The W-2 Box 1 vs Box 5 explanation really cleared things up for me. I just pulled out my most recent paystub and sure enough, the Medicare wages line shows my full gross pay while the federal taxable wages line shows the reduced amount after my 401k contribution. What's particularly frustrating is that my HR department couldn't explain this when I asked them about it last month. They just kept saying "pretax deductions reduce your taxable income" without understanding that Medicare tax works differently. I ended up thinking there was an error in my payroll processing. At least now I can stop trying to find some magical deduction that will get me under the $125k threshold. Time to focus on the tax savings I can actually get and just accept that the Additional Medicare Tax is part of life when you're over the limit.

This whole thread has been eye-opening! I'm a newcomer to this community and just stumbled across this discussion while researching my own Medicare tax situation. I'm filing MFS with about $148k in gross income and have been maxing out my 401k thinking it would help me avoid the Additional Medicare Tax. Reading through everyone's explanations, especially the W-2 Box 1 vs Box 5 breakdown, finally makes sense of why I'm still getting hit with the extra 0.9% despite my pretax contributions. I had no idea that Medicare wages were calculated separately from regular income tax wages. What really strikes me is how many people seem to run into this same confusion - and even HR departments don't always understand the distinction. It makes me wonder how many people are out there thinking they can deduct their way out of the Additional Medicare Tax when it's basically impossible with standard employee benefits. Thanks to everyone who took the time to explain this so clearly. At least now I can stop searching for loopholes that don't exist and focus on the tax strategies that actually work for my situation. This community is incredibly helpful for navigating these complex tax issues!