The IRS recently released guidance on the new IRC Section 1411 Net Investment Income Tax – HERE.
Obamacare is of course controversial but after Justice Robert’s Opinion we know that it is here to stay indefinitely.
So what is the tax effect?
Basics
- This tax applies at a rate of 3.8%
- It applies to individuals, estates and trusts
- Takes effect on January 1, 2013
Who Will Owe the Tax
- Individuals with Adjusted Gross Incomes above the following threshold amounts:
|
Filing Status |
Threshold Amount |
| Married filing jointly |
$250,000 |
| Married filing separately |
$125,000 |
| Single |
$200,000 |
| Head of household (with qualifying person) |
$200,000 |
| Qualifying widow(er) with dependent child |
$250,000 |
What types of income are subject to the tax
- Interest Income
- Dividends
- Capital Gains
- Rental Income
- Royalty Income
- Non-qualified annuities
- Income trading financial instruments or commodities
- Other passive activity income
What type of income is not subject to the tax
- Wages
- Unemployment Compensation
- Income from “active” trades or businesses.
- Social Security
- Alimony
- Tax Exempt Interest
- Self-Employment Income
- Distributions from Qualified Retirement Plans.
This new tax is going to effect a lot of unsuspecting people. For instance, the sale of a personal residence is subject to the tax.
It is wise to explore planning options before the end of the year.