Obamacare tax

[Rock Private Office]

On January 1st this year new taxes resulting from the Patient Protection and Affordable Care Act, or ‘Obamacare’ came into effect. The Medicare Investment Income tax imposes a 3.8% surtax on all income derived from the following:

Interest; dividends; capital gains; royalties; annuities; rents. And income derived from passive activities including: trading financial instruments and commodities as well as net capital gains from the sale of property.

The surtax is imposed on the lesser of net investment income or the amount by which the modified adjusted gross income (MAGI) exceeds $200,000 for single filer $250,000 for married filing jointly $125,000 for married filing separately

The second tax is an increase in Medicare Part A Taxes which increase by .9% for individuals making over $200,000 a year or joint filers earning over $250,000.

So does the 3.8% surtax apply to the sale of your principal residence? The answer is ‘it could’ but can be avoided with planning careful planning.

If you are an American citizen and your income in 2013 is high you could be subject to a marginal tax rate of 43.4%.