Now that the new healthcare law has been declared constitutional, many of the lesser publicized (and costly) aspects of the provisions will go into effect. One of these provisions is the 3.8% Surtax that will be levied against certain taxpayers with the intent of generating an estimated $210 billion to fund healthcare and the Medicare overhaul plans. Who will this tax impact?
To begin with some tax payers are exempt. If you are a taxpayer, (married and filing jointly) with an adjusted gross income $250,000 or, an individual taxpayer with an adjusted gross income of $200,000 or less this law should not apply to you. If however your modified adjusted gross income (MAGI) is greater than these threshold amounts that applies to you, you will pay a 3.8% tax on the lesser or a) your net investment income or b) the amount of your modified adjusted gross income over the threshold amount. This surtax liability is determined on income before any tax deductions are considered.
This means that your deductions could put you in the lowest income tax bracket, yet you could still have investment income subject to the surtax. In addition the capital gain rate is scheduled to increase for high-income taxpayers to 20% in 2013, so that the total tax on capital gains (with the surtax) could be 23.8% in 2013 and beyond. As you would imagine there are some very complicated formulas to use to determine if/how much you might be subject to pay and your accountant would be the best source for this information. However, as an aid, the National Association of Realtors has prepared a brochure that does offer some sample cases which might help consumers determine if they should seek additional advice.
All sellers would be well advised to take a minute to review this easy to read guide. http://www.ksefocus.com/billdatabase/clientfiles/172/8/1437.pdf