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Question: Does the Medicare tax increase wage limit of $200,000 include bonuses?

Answer: Yes.  The calculation of wages for purposes of withholding additional Medicare tax is the same way that it calculates wages for withholding the existing Medicare tax.  Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. The pay may be in cash or in other forms. It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. It does not matter how you measure or make the payments. Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and federal unemployment taxes and income tax withholding.

More information on taxable wages can be found at:  http://www.irs.gov/publications/p15/ar02.html#en_US_2012_publink1000202313

Additional information on the new Medicare tax can be found at:  http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax