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Health Care Bill Introduces New Taxes
The health care legislation President Obama signed Tuesday is lengthy and complicated. Of course, many taxpayers are asking "what will it cost me?" Among other new taxes and penalties, these two (both take effect in 2013) affect higher earners and those with high investment income. One tax is a "done deal." The other requires further action by the U.S. Senate. They are:
Additional Hospital Insurance Tax (HI) for high wage workers. For tax years beginning after Dec. 31, 2012, the HI tax rate would be increased by 0.9 percentage points on an individual taxpayer with earned income (wages or business income) over $200,000 ($250,000 for married couples filing jointly); these figures are not indexed. This is in addition to the current 2.9% Medicare tax, but only applies to income over $200,000 (or $250,000 for joint returns). This (combined with Medicare) means a total tax of 3.8%. This tax is now law.
Surtax on unearned income. For tax years beginning after Dec. 31, 2012, a 3.8% surtax called the Unearned Income Medicare Contribution, would be placed on net investment income of a taxpayer in excess of $200,000 ($250,000 for a joint return). Net investment income would be interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business). Net investment income would be reduced by properly allocable deductions to such income. Note this type of income is not currently subject to the 2.9% Medicare tax. This tax requires further action by the Senate. |