New 3.8% “Medicare” tax on Net Investment Income for ALL Individual Taxpayers!

Effective January 1, 2013, as the law is currently written, a 3.8% Medicare tax will be imposed on all net investment income (interest, dividends, annuity income, capital gains, rents and royalties, etc.) reported on individual income tax returns.  Here is the new Section of the law recently passed as part of the health care reform:

‘‘SEC. 1411. IMPOSITION OF TAX.

‘‘(a) IN GENERAL.—Except as provided in subsection (e)—
‘‘(1) APPLICATION TO INDIVIDUALS.—In the case of an individual,
there is hereby imposed (in addition to any other tax
imposed by this subtitle) for each taxable year a tax equal
to 3.8 percent of the lesser of—
‘‘(A) net investment income for such taxable year, or
‘‘(B) the excess (if any) of—
‘‘(i) the modified adjusted gross income for such
taxable year, over
‘‘(ii) the threshold amount.
‘‘(b) THRESHOLD AMOUNT.—For purposes of this chapter, the
term ‘threshold amount’ means—
‘‘(1) in the case of a taxpayer making a joint return under
section 6013 or a surviving spouse (as defined in section 2(a)),
$250,000,
‘‘(2) in the case of a married taxpayer (as defined in section
7703) filing a separate return, 1⁄2 of the dollar amount determined
under paragraph (1), and
‘‘(3) in any other case, $200,000.

Now Congress might have intended this tax to apply only to high income individuals (over $250,000 married, filing jointly or over $200,000 as a single individual), but that is NOT how the law is written.

If you’re already over the $250,000, you can add this new 3.8% tax to the income taxes you’re already paying.   If you’re under the $200,000 in adjusted gross income, you might want to ask your Congressional representatives if they’re going to fix this error, which if the Internal Revenue implements literally, will make all of us pay the 3.8% on even our little savings accounts, but it will especially hit the elderly on fixed incomes who depend upon their annuities and other investments in their retirement.