3.8% Net Investment Income Tax

In a nutshell, if you have what many would consider high income, and some of that income comes from other than salary, you may be have an additional tax in 2013.

This tax affects those with investment income. Investment income generally includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities, and businesses that are passive activities to the taxpayer. If any of these apply to you, your income is the next consideration.

Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following amounts:

Filing Status

Married filing jointly $250,000

Married filing separately $125,000

Single $200,000

Head of household (with qualifying person) $200,000

Qualifying widow(er) with dependent child $250,000

Individuals should be aware that these amounts are not indexed for inflation.

If you are an individual that is exempt from Medicare taxes, you still may be subject to the Net Investment Income Tax if you have Net Investment Income and also have modified adjusted gross income over the applicable thresholds. If your income is likely to be near these amounts on your 2013 tax return, you should see your tax advisor about the need to increase your withholding to cover this tax on your tax return next year.

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