New Tax in 2013

1. How does the 0.9% tax work?
2010 employment income -joint income is $350,000
2010 medicare tax you owe - $350,000 x 1.45% = $5,075
Your employer will owe a matching amount
2013 medicare tax  $350,000 x 1.45% +
$350,000 (assumed) - $250,000 fixed) x 0.9% = $5,975
Your employer will not pay this extra $900
2. The 3.8% tax on net investment income
The tax is a flat 3.8% on investment income above the threshold.
threshould for the “modified adjusted gross income” (AGI)
Couple - $250,000
Single - $200,000
Example: If a couple has $400,000 AGI -$200,000 of wages & $200,000
Investment income
$400,000 - $250,000 = $150,000
$150,000 * 3.8% = $5,700 (Extra tax you owe)
Example: A single earns $40,000 but has an investment windfall of $190,000
$40,000 + $190,000 = $230,000
Tax: ($230,000 – $200,000) * 3.8% = $1140
Example: Retiree wih no wages but $90,000 IRA payout and $150,000 investment
Income
$90,000 + $150,000 = $240,000
Don’t owe the new tax!
3. Could the 3.8% tax apply to gains on the sales of a home?
Yes, if there is a taxable gain above the $500,000($250,000,ingle)exclusion for Gains on the sales of your residence.
4. What happens if a tax payer who has a large itemized deduction?
Even if taxable income is zero because of deductions, he/she could still owe the
3.8% tax.
Example: Income($100,000) and wages ($200,000) together: $300,000
Loses of ponzi scheme $300,000
($300,000 - $200,000) * 3.8% = $3,800
Still owes $3,800 on net investment income

5. How to minimize these taxes?
 SSI and pension doesn’t count as investment income
 Roth IRA withdrawals don’t raise AGI and aren’t investment income
 Consider installment sales of asset