January 7, 2013

Are You Ready for the New Surtax?

Starting with this tax year, many Americans will be handing over even more of their income to the IRS. The new 3.8% surtax, which is part of the Patient Protection and Affordable Care Act, will be assessed on net investment income above $200,000 for single individuals, and $250,000 for married couples filing jointly. For estates and trusts, the threshold is only $11,650.

For purposes of this surtax, “investment income” includes interest (except tax-exempt interest), dividends, annuities, royalties, rents, and other gross income attributable to a passive activity, as well as net capital gains from the disposition of property that is not held in an active trade of business.

This tax applies to retirees, as well — after selling a home, or if the non-taxable portion of their income (such as pension or traditional IRA distributions) pushes their total income above the threshold.

Strategies to minimize this tax will depend on what investments you have, how close you are to retirement, and other factors. To find out more about this new tax, and how you can reduce its impact by managing your adjusted gross income as well as your investment income, contact Maddox, Thomson & Associates today.