Joseph Perry, Partner-in-Charge, Tax & Business Services, Featured in AdvisorOne Article "Forget the Cliff, 3.8% Obamacare Tax Is Coming: What Advisors Are Telling Clients"
By Joyce Hanson
With all the buzz around the fiscal cliff and the Bush tax cuts that are set to expire in 2013, what tends to get overlooked is a tax that will definitely take effect in the new year: the 3.8% tax on investment income.
Congress passed the 3.8% tax in 2010 to add an estimated $210 billion of funds into President Obama’s Affordable Care Act and Medicare overhaul, and the new tax is scheduled to go into effect on Jan. 1, 2013.
Best Time to Plan Is Now
”The 3.8% tax doesn’t relate to the fiscal cliff. It relates to Obamacare,” said Joseph Perry, a New York-based partner-in-charge of tax and services for Marcum LLP, an accounting and advisory firm.
”The key,” Perry added, ”is for people to reach out now to their accountants and financial advisors to plan for the year-end to legally reduce the amount of taxes they would pay in order to put more money in their pocket. What we find at Marcum is that clients aren’t focused on the 3.8% tax. We’re recommending them to get their financial advisors involved and sometimes their attorneys.”
According to the congressional Health Care Caucus’ information site, the new tax will be imposed on unearned net investment income, including capital gains from stock sales, dividend income, bonds, mutual funds, annuities, loans and home sales. People subject to the tax are individual filers who earn adjustable gross income of more than $200,000 and married couples filing jointly with AGI of more than $250,000.
”In its simplest form, if you have a single person who receives $50,000 in interest income, that person will get taxed. The tax includes capital gains, but it doesn’t include salary, bonus, pension or IRA,” Perry said.