Although high-income taxpayers entered 2013 with a cloud of uncertainty hanging over their heads, this much was clear: You’ll have to contend with a new 3.8% Medicare surtax on investment earnings. The new surtax was included in the 2010 health care legislation upheld by the U.S. Supreme Court last year.
Alert: Now the IRS has issued new proposed regulations on the 3.8% surtax. (Proposed Reg-130507-11) The much-anticipated regs clarify and explain some of the key rules.
In addition, the IRS has posted the answers to frequently asked questions (FAQs) on its website.
Here’s the whole story: Effective Jan. 1, 2013, the 3.8% Medicare surtax applies to the lesser of “net investment income” (NII) or the amount by which modified adjusted gross income (MAGI) exceeds a threshold of $200,000 for single filers and $250,000 for joint filers. For example, if you’re a joint filer and have annual NII of $100,000 and a MAGI of $300,000 in 2...(register to read more)