Effective January 1, 2013, investment income of people with gross adjusted income over a certain threshold will be subject to a 3.8% tax. The threshold is $200,000 for single filers and $250,000 for joint filers. Income from certain investments will not be subject to the tax. The tax applies to investment income that causes the gross adjusted income of the individual or couple to be in excess of the $200,000 or $250,000 threshold.
The income unaffected by the tax, according to the Wall Street Journal, includes:
-payouts from a regular or Roth IRA, 401(k) plan or pension
-Social Security income
-annuities that are part of a retirement plan
-life-insurance proceeds
-municipal-bond interest
-veterans’ benefits
-Schedule C income from businesses
-income from a business on which you are paying self-employment tax, such as a Subchapter S firm or a partnership
Income that is expected to be subject to the tax, according to the Wall Street Journal, includes:
-dividends
-rents
-royalties
-interest, except municipal-bond interest
-short- and long-term capital gains
-the taxable portion of annuity payments
-income from the sale of a principal home above the $250,000/$500,000 exclusion
-a net gain from the sale of a second home
-passive income from real estate and investments in which a taxpayer doesn’t materially participate, such as a partnership
For examples of how to calculate the tax, see the linked articles below.
Sources:
“Get Ready for the New Investment Tax” (Wall Street Journal)
“Medicare tax hikes: What the rich will pay” (CNN)
“About That Investment Tax…” (Wall Street Journal)
This alert applies to the Series 6, Series 7, Series 62, Series 82, Series 65, and Series 66.