IRS Publishes Investment Tax Rules

Remember ObamaCare. Well it’s in the news again but this time it has nothing to do about healthcare. Part of the bill Congress passed included various other tax increases, including a surtax on investment income.

The surtax, an additional tax in addition to anything else paid by the individual, is 3.8% of income derived from investments (stocks, bonds, etc.) and applies to individuals whose modified adjusted gross income (MAGI) exceeds $200,000 or couples who’s MAGI tops $250,000.

Implementation of the surtax has been waiting on the IRS to issue rules covering how the tax will be applied. That happened just a few days ago so if you have investment income (at any level) and fall in the highly compensated category then the tax now applies to you and will be a part of your 2012 tax return.
So if you suspect this surtax will apply to you, give some serious thought to doing a little tax planning before the year ends. Consider cutting your losses on some other non-performing or under-performing stocks that could offset gains, hold off on liquidating highly-performing assets until after December 31, 2012 to at least roll the gains into next year.

And if you don’t think the surtax applies to you, you’ll still want to keep your eye on changes Congress is making. The “bill” for ObamaCare is expected to be huge and Congress is busy right now attempting to figure out how to fund it further. It’s likely to impact everything from the way student loans are collected (automatic wage garnishments) to surtax MAGI levels lowering so the tax applies to everyone.

One thing’s for certain – taxes are on the rise.

By: Evan A. Nielsen