General Discussion
In reply to the discussion: Well, for me Obamacare is a washout. [View all]progree
(10,909 posts)Here is a dump of some of my raw notes. HOH = head of household, MFJ = Married Filing Jointly. MAGI = Modified Adjusted Gross Income
# Medicare additional tax 0.9% on any earned income amounts above 200/250 K (Single & HOH / MFJ) of wages, compensation and self-employment income (does not depend on AGI, its a tax on earned income just like regular payroll taxes are)
# 3.8% surcharge on net investment income (NII surtax) applies to the lesser of: net investment income #or# MAGI amounts that exceed 200 / 250 K for Single & HOH/MFJ. These thresholds are not indexed for inflation. NII includes, but not limited to, taxable interest, dividends, non-fqualified annuities, rents and royalties, capital gains and passive income from partnerships. Capital gains from the sale of one's primary residence are subject to the tax to the extent the income exceeds the applicable home sale exclusion ($500,000 for MJF and $250,000 for single filers). Excluded fron the new tax are tax-exempt interest (e.g. municipal bond interest payments), distributions from IRAs and distributions from qualified retiermernet plans (e.g. 401k plans). FFI: www.irs.gov/uac/Newsroon/Net-Investment-Income-Tax-FAQs.
Example (amounts in K$): single with 225 AGI which includes 30 of NII. Since the excess AGI of 25 is lower than the 30 of NII, he pays the tax only on 25.
From http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs and the above example, it is clear that if you have a MAGI below the 200 / 250 k amounts, you don't have to worry about the tax, no matter how much NII you have (as long as it doesn't drive your MAGI over those thresholds -- e.g. a single could have 50 K in non-NII income and 150 K in NII income and would pay zero NII tax because his MAGI is 200 K.).
Its also called the hospital insurance tax in the Code. - so is correct to call it a Medicare tax.