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Everything You Wanted To Know About the Net Investment Income Tax aka the 3.8% Medicare Contribution Tax
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Alan
Dec 1, 2012, 11:08:25 PM12/1/12
to
IRS FAQs:
http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
Proposed Regulations:
https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-29238.pdf
or http://goo.gl/XC6ED
Forbes Analysis of Regs:
http://www.forbes.com/sites/anthonynitti/2012/12/01/ten-things-we-learned-from-the-new-obamacare-investment-tax-regulations/
or
http://goo.gl/5LnE5
--
Alan
http://taxtopics.net
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
Proposed Regulations:
https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-29238.pdf
or http://goo.gl/XC6ED
Forbes Analysis of Regs:
http://www.forbes.com/sites/anthonynitti/2012/12/01/ten-things-we-learned-from-the-new-obamacare-investment-tax-regulations/
or
http://goo.gl/5LnE5
--
Alan
http://taxtopics.net
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
Pico Rico
Dec 2, 2012, 1:38:32 PM12/2/12
to
"Alan" <temp...@vacationmail.com> wrote in message
news:k9ek7h$rvo$1...@dont-email.me...
> IRS FAQs:
> http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
>
> Proposed Regulations:
> https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-29238.pdf
> or http://goo.gl/XC6ED
>
> Forbes Analysis of Regs:
> http://www.forbes.com/sites/anthonynitti/2012/12/01/ten-things-we-learned-from-the-new-obamacare-investment-tax-regulations/
> or
> http://goo.gl/5LnE5
>
Truer words were never spoken: "These proposed regulations are both
> http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
>
> Proposed Regulations:
> https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-29238.pdf
> or http://goo.gl/XC6ED
>
> Forbes Analysis of Regs:
> http://www.forbes.com/sites/anthonynitti/2012/12/01/ten-things-we-learned-from-the-new-obamacare-investment-tax-regulations/
> or
> http://goo.gl/5LnE5
>
interesting and longer than the Old Testament. I'm kidding of course; they're
not interesting at all."
A question about rental income.
Taxpayer owns and leases on long terms several substantial properties, in
several SMLLCs. Taxpayer can very likely pass the "material participation"
and "active trade or business" tests, and can start keeping a detailed log
of his activities. Taxpayer is not concerned with net passive losses.
However, taxpayer is concerned with avoiding the new 3.8% tax if possible.
As I understand it, rents will not be subject to the 3.8% tax if they are
non-passive. Are there any disadvantages to establishing that such rents re
non-passive and from an active trade or business? Such as SE taxes, etc?
removeps-groups
Dec 2, 2012, 9:23:36 PM12/2/12
to
"Pico Rico" <Pico...@nonospam.com> wrote in message
news:k9fjdc$asg$1...@news.mixmin.net...
> As I understand it, rents will not be subject to the 3.8% tax if they are
> non-passive. Are there any disadvantages to establishing that such rents
> re non-passive and from an active trade or business? Such as SE taxes,
> etc?
Yes, self employment income is also subject to the normal medicare tax of
2.9%, but there is an additional 0.9% tax on it if your income is over
200k/250k. And of course, social security tax, but if your other W-2 income
is over the threshold (around 110k), then this tax does not apply.
No one in the media ever talks about the marriage penalty aspect of this
tax. If two single people make 150k they don't have to deal with this tax,
but upon getting married they do.
news:k9fjdc$asg$1...@news.mixmin.net...
> As I understand it, rents will not be subject to the 3.8% tax if they are
> non-passive. Are there any disadvantages to establishing that such rents
> re non-passive and from an active trade or business? Such as SE taxes,
> etc?
2.9%, but there is an additional 0.9% tax on it if your income is over
200k/250k. And of course, social security tax, but if your other W-2 income
is over the threshold (around 110k), then this tax does not apply.
No one in the media ever talks about the marriage penalty aspect of this
tax. If two single people make 150k they don't have to deal with this tax,
but upon getting married they do.
Mark Bole
Dec 2, 2012, 10:10:20 PM12/2/12
to
On 2012-12-02 18:23, removeps-groups wrote:
> No one in the media ever talks about the marriage penalty aspect of this
> tax. If two single people make 150k they don't have to deal with this tax,
> but upon getting married they do.
>
Just as no one in the media ever talks about the marriage reward aspect
> No one in the media ever talks about the marriage penalty aspect of this
> tax. If two single people make 150k they don't have to deal with this tax,
> but upon getting married they do.
>
of this tax. If a single person makes $225K he has to deal with this
tax, but upon getting married to someone with no income, he doesn't.
--
Mark Bole, EA
Enrolled Agents - America's Tax Experts
http://markboletax.com
Pico Rico
Dec 2, 2012, 10:55:08 PM12/2/12
to
"removeps-groups" <removep...@yahoo.com> wrote in message
news:k9h2f2$ck3$1...@speranza.aioe.org...
> "Pico Rico" <Pico...@nonospam.com> wrote in message
> news:k9fjdc$asg$1...@news.mixmin.net...
>
>> As I understand it, rents will not be subject to the 3.8% tax if they are
>> non-passive. Are there any disadvantages to establishing that such rents
>> re non-passive and from an active trade or business? Such as SE taxes,
>> etc?
>
> Yes, self employment income is also subject to the normal medicare tax of
> 2.9%, but there is an additional 0.9% tax on it if your income is over
> 200k/250k. And of course, social security tax, but if your other W-2
> income is over the threshold (around 110k), then this tax does not apply.
>
but isn't rental income not subject to SE tax, unless you are a dealer or
> news:k9fjdc$asg$1...@news.mixmin.net...
>
>> As I understand it, rents will not be subject to the 3.8% tax if they are
>> non-passive. Are there any disadvantages to establishing that such rents
>> re non-passive and from an active trade or business? Such as SE taxes,
>> etc?
>
> Yes, self employment income is also subject to the normal medicare tax of
> 2.9%, but there is an additional 0.9% tax on it if your income is over
> 200k/250k. And of course, social security tax, but if your other W-2
> income is over the threshold (around 110k), then this tax does not apply.
>
provide significant additional services?
zvkmpw
Dec 3, 2012, 7:04:10 PM12/3/12
to
> IRS FAQs:
> http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
>
> Proposed Regulations:
> https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-29238.pdf
>
> Forbes Analysis of Regs:
> http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
>
> Proposed Regulations:
> https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-29238.pdf
>
> http://goo.gl/5LnE5
Apparently, MAGI means one thing for the Net Investment Income Tax (NIIT) and a different thing for the Medicare Premium Parts B and D Income-related Adjustment (MPIA).
For MPIA, MAGI includes tax-exempt interest, but for NIIT, it does not.
Is this correct?
Alan
Dec 3, 2012, 7:51:19 PM12/3/12
to
On 12/3/12 5:04 PM, zvkmpw wrote:
> Medicare Premium Parts B and D Income-related Adjustmen
Yes they are different. MAGI for the premiums is AGI plus tax-exempt
> Medicare Premium Parts B and D Income-related Adjustmen
income. MAGI for the NIIT is AGI adjusted for the foreign earned income
exclusion.
--
Alan
http://taxtopics.net
removeps-groups
Dec 4, 2012, 7:48:47 PM12/4/12
to
"Pico Rico" <Pico...@nonospam.com> wrote in message
news:k9h6p4$lf7$1...@news.mixmin.net...
>>> As I understand it, rents will not be subject to the 3.8% tax if they
>>> are non-passive. Are there any disadvantages to establishing that such
>>> rents re non-passive and from an active trade or business? Such as SE
>>> taxes, etc?
>>
>> Yes, self employment income is also subject to the normal medicare tax of
>> 2.9%, but there is an additional 0.9% tax on it if your income is over
>> 200k/250k. And of course, social security tax, but if your other W-2
>> income is over the threshold (around 110k), then this tax does not apply.
>
> but isn't rental income not subject to SE tax, unless you are a dealer or
> provide significant additional services?
subject to the full medicare 3.8% tax if your income is over 200k/250k.
removeps-groups
Dec 4, 2012, 8:08:45 PM12/4/12
to
"Mark Bole" <ma...@pacbell.net> wrote in message
news:k9h56k$71r$1...@dont-email.me...
>> No one in the media ever talks about the marriage penalty aspect of this
>> tax. If two single people make 150k they don't have to deal with this
>> tax,
>> but upon getting married they do.
>
> Just as no one in the media ever talks about the marriage reward aspect of
> this tax. If a single person makes $225K he has to deal with this tax, but
> upon getting married to someone with no income, he doesn't.
I would still argue that they have a marriage penalty because the savings is
not as much as it otherwise would have been. That is, suppose the tax
medicare kicked in at 400k for married people. So in this scenario, a
single person making 350k would not have not have to deal with this medicare
tax. In CA, the thresholds for each tax bracket, phaseout, etc for married
people are double that for single filers -- except for the mental health
services tax -- so there is no marriage penalty. Anyway, the Bay Area has
many people in this category, so in theory it should be an issue out here.
In theory the tax could encourage couples to just live together and not get
married. The Bush tax cut made the standard deduction for married filers
double that of single filers (it was previously about 1.5), thus giving
regular and lower income married filers a marriage penalty; but then again,
upper middle income and upper income taxpayers get less sympathy.
news:k9h56k$71r$1...@dont-email.me...
>> No one in the media ever talks about the marriage penalty aspect of this
>> tax. If two single people make 150k they don't have to deal with this
>> tax,
>> but upon getting married they do.
>
> Just as no one in the media ever talks about the marriage reward aspect of
> this tax. If a single person makes $225K he has to deal with this tax, but
> upon getting married to someone with no income, he doesn't.
not as much as it otherwise would have been. That is, suppose the tax
medicare kicked in at 400k for married people. So in this scenario, a
single person making 350k would not have not have to deal with this medicare
tax. In CA, the thresholds for each tax bracket, phaseout, etc for married
people are double that for single filers -- except for the mental health
services tax -- so there is no marriage penalty. Anyway, the Bay Area has
many people in this category, so in theory it should be an issue out here.
In theory the tax could encourage couples to just live together and not get
married. The Bush tax cut made the standard deduction for married filers
double that of single filers (it was previously about 1.5), thus giving
regular and lower income married filers a marriage penalty; but then again,
upper middle income and upper income taxpayers get less sympathy.
Pico Rico
Dec 4, 2012, 8:52:05 PM12/4/12
to
news:k9m5l3$isg$1...@speranza.aioe.org...
Or so it seems.
> "Pico Rico" <Pico...@nonospam.com> wrote in message
> news:k9h6p4$lf7$1...@news.mixmin.net...
>
>>>> As I understand it, rents will not be subject to the 3.8% tax if they
>>>> are non-passive. Are there any disadvantages to establishing that such
>>>> rents re non-passive and from an active trade or business? Such as SE
>>>> taxes, etc?
>>>
>>> Yes, self employment income is also subject to the normal medicare tax
>>> of 2.9%, but there is an additional 0.9% tax on it if your income is
>>> over 200k/250k. And of course, social security tax, but if your other
>>> W-2 income is over the threshold (around 110k), then this tax does not
>>> apply.
>>
>> but isn't rental income not subject to SE tax, unless you are a dealer or
>> provide significant additional services?
>
> Yes, normally rental income is not subject to SE tax. But then it is
> subject to the full medicare 3.8% tax if your income is over 200k/250k.
unless you are a real estate professional, making the property non-passive.
> news:k9h6p4$lf7$1...@news.mixmin.net...
>
>>>> As I understand it, rents will not be subject to the 3.8% tax if they
>>>> are non-passive. Are there any disadvantages to establishing that such
>>>> rents re non-passive and from an active trade or business? Such as SE
>>>> taxes, etc?
>>>
>>> Yes, self employment income is also subject to the normal medicare tax
>>> of 2.9%, but there is an additional 0.9% tax on it if your income is
>>> over 200k/250k. And of course, social security tax, but if your other
>>> W-2 income is over the threshold (around 110k), then this tax does not
>>> apply.
>>
>> but isn't rental income not subject to SE tax, unless you are a dealer or
>> provide significant additional services?
>
> Yes, normally rental income is not subject to SE tax. But then it is
> subject to the full medicare 3.8% tax if your income is over 200k/250k.
Or so it seems.
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