It’s been coming for three years, but now the day of tax reckoning for higher-income investors has finally arrived.
Alert: For the first time, you may have to pay the 3.8% Medicare surtax on “net investment income” (NII) on your 2013 tax return. The tax is computed on Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts.
The IRS recently issued new regulations clarifying the rules concerning the imposition of this new and long-dreaded tax.
Here’s the whole story: Beginning in 2013, the 3.8% Medicare surtax applies to the lesser of NII or the excess of modified adjusted gross income (MAGI) over an annual threshold.
The threshold is $200,000 for single filers and $250,000 for married joint-filing couples.
For this purpose, NII includes the following:
- Interest and dividends
- Distributions from annuities
- Rent and royalties
- Income and gains from passive business activities
- Income and gains from the business o...(register to read more)