To: Moonray who wrote (144296 ) 11/2/2012 7:59:59 PM From: John Koligman 2 Recommendations Read Replies (2) | Respond to There is also going to be a 3.8% surcharge on those capital gains for higher earners starting next year...Additional 3.8% Medicare Tax on Investment Income Exception for Business Activities : Income from categories 1-6 is generally not taken into account for purposes of the additional 3.8% Medicare tax if the income is from a business activity. Exception to the Exception : Income from categories 1-6 is taken into account if it is from a passive business activity or the business of trading in financial instruments or commodities. For example, net gains from selling rental properties could apparently be hit with the additional 3.8% Medicare tax, and so could net gains from selling passive investments in partnerships and S corporations. Exception for Distributions from Tax-Favored Retirement Plans : Net investment income for purposes of the additional 3.8% Medicare tax does not include distributions from tax-favored retirement plans and accounts such as 401(k) plans, pension plans, traditional IRAs, and Roth IRAs. Income Threshold and Tax Base : The additional 3.8% Medicare tax will not apply unless your modified adjusted gross income (MAGI) exceeds: (1) $200,000 for an unmarried individual, (2) $250,000 for a married joint-filing couple, or (3) $125,000 for those who use married filing separate status. Example 1 : In 2013, you and your spouse will file jointly and have MAGI of $300,000 and $60,000 of net investment income. You will owe the 3.8% additional Medicare tax on $50,000 (the lesser of your excess MAGI of $50,000 or your net investment income of $60,000).Example 2 : In 2013, you will file as an unmarried individual with MAGI of $300,000 and $90,000 of net investment income. You will owe the 3.8% additional Medicare tax on $90,000 (the lesser of your excess MAGI of $100,000 or your net investment income of $90,000).
