This tax is complicated, so be sure to consult with a tax professional.
The surtax will apply to taxpayers whose modified adjusted gross income exceeds:
—$250,000 for married taxpayers filing jointly and surviving spouses;
—$125,000 for married taxpayers filing separately;
—$200,000 for unmarried taxpayers and heads of household.”
“The amount actually subject to the tax is the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold ($250,000, $200,000, or $125,000) that applies to you,” said Sibley.
Any income exempt from income tax is similarly exempt from this tax, Sibley said.
“This means that tax-exempt interest and the excluded gain from the sale of your main home aren’t subject to the tax.”
Money from retirement plans, such as individual retirement accounts, also aren’t subject to the tax.
Like the net investment income tax, the additional 0.9 percent Medicare tax kicks in on earnings over $250,000 for married couples filing jointly and $200,000 for singles and heads of household.
“Each tax is designed to fund different areas of health care reform, based on income thresholds,” Luscombe said.
SAME-SEX COUPLES: The Supreme Court’s decision on the Defense of Marriage Act has led to significant changes by the Internal Revenue Service, which for the first time will begin recognizing same-sex married couples for federal tax purposes. That applies even if the couple lives in a state that doesn’t recognize same-sex marriage.
That means that legally married same-sex couples must choose married filing jointly or married filing separately when doing their tax returns for 2013.
“Previously, same-sex married couples could file under the married status in certain states, but not for federal tax returns,” Luscombe said.
One consequence is that some couples may face higher taxes, especially if both spouses work.
“The many provisions of the Internal Revenue Code that create a potential marriage penalty for dual income couples could also create higher taxes for dual income same-sex couples,” Luscombe said.
For example, with their incomes combined, they might hit the threshold for the extra Medicare taxes, or the beginning of the phase-out of deductions and the standard exemptions.