Health Care Reform – Additional Tax on High Income Earners

 By: Jill F. Rosenfeld, Esq.

 Part 2 – New Tax on Investment Income.

 Beginning in 2013, a new 3.8% tax will be assessed on investment income earned by individuals who are assessed the 0.9% increase on wages discussed in Part 1 of this series (i.e,. thresholds of $250,000 for married filing jointly, $200,000 for singles and $125,000 for those married filing separately). Investment income includes interest (except municipal bond interest), dividends, rents, royalties, capital gains on sales of investment instruments and bonds, taxable portion of insurance annuity payouts (unless from company pension), passive income from rents and businesses the taxpayer does not actively participate in and taxable gain on the sale of a home over the $500,000 exclusion ($250,000 for single filers).

 For example: if a married couple has Adjusted Gross Income (AGI) in 2013 of $400,000 consisting of $200,000 in wages and $200,000 in investment income, they will owe an additional $5,700 in Medicare taxes ($400,000 AGI – $250,000 threshold = $150,000 x 3.8%).

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