A New 3.8% Income Tax Increase For You, Compliments of Obamacare
- Written by Rogers Sheffield & Campbell
- Published: 26 June 2014
If you are a high-income taxpayer, 2013 was a drag. You had to pay the new Net Investment Income Tax (NIIT), essentially a 3.8% assessment on some of your investment income. The NIIT was passed into law in 2010 to help pay for ObamaCare (the Affordable Care Act), but it didn’t take effect until 2013. The NIIT affects everyone whose modified adjusted gross income is above $200,000 for an individual or $250,000 for a couple. This income bar won’t be adjusted for inflation as the law is written, which is also a drag. What’s subject to the NIIT, you ask? Quite a bit...
For example, rental income, royalty income, dividends, interest, nonqualified annuities, capital gains, businesses that are taxed as “passive activities” and income from businesses involved in the trading of commodities or financial instruments.
There are reasonable ways to reduce or avoid the NIIT. Here are some options offered by Kelly Phillips Erb on Forbes that you can discuss with your tax planner. You will probably recognize many of these techniques, others may be new:
1. Buy municipal bonds.
2. Give it away.
3. Lend money to your business.
4. Take an active role in your business.
5. Rent property to your business.
6. Become a Realtor.
7. Swap property.
8. Sell on installment.
9. Sell your losers.
10. Pay your advisors.
Read more on Forbes: Outwitting The NIIT: 12 Ways To Avoid The New Net Investment Income Tax
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- The Tax Law Team
Rogers Sheffield & Campbell, LLP