New Medicare Tax Act

Reminder to those earning over $200,000 single, $250,000 jointly

The new Medicare Tax Act adds additional taxes of:

  1. .9% on earned income
  2. 3.8% on investment income.

Included:

  • Interest
  • Dividends
  • Capital Gains
  • Non-Qualified Annuities
  • Royalties
  • Rents
  • Passive Income from S-Corps or Partnerships

Excluded:

  • Muni Bond Interest
  • Nontaxable Veterans Benefits
  • Nontaxable gains from the sale of a primary home
  • Distributions from IRAs, 403(b)s, 401(k)s, 457s, pension, profit-sharing stock bonus and qualified annuity plans

What to do:

  • Increase payroll withholding
  • Increase estimated taxes
  • Harvest capital gains with losses
  • Convert IRAs to Roth IRAs
  • Defer to a year when income will be below the threshold
  • Turn passive into active investments