2013's New 3.8% Medicare Tax on Investment Income

December 11, 2012

A new 3.8% surtax on certain investment income shall be effective for tax years beginning after December 31, 2012. This tax, also called the Health Care Surtax or the Medicare tax, will be imposed on individuals, trusts and estates. The tax is applied as follows:

For individuals, 3.8% of the lesser of:

1) Net investment income for the taxable year, or

2) The excess, if any, of modified adjusted gross income for such year, over the threshold amount:

Married taxpayers filing jointly:


Married taxpayers filing separately:


All other individual taxpayers:


This tax will not affect you if you make less than the above threshold amounts or have no investment income.

For trusts and estates, 3.8% of the lesser of:

1) The undistributed net investment income for the year, or

2) The excess, if any, of adjusted gross income for such year, over the dollar amount at which the highest tax bracket begins for the year (estimated at $12,000 for 2013).

Special rules exist with respect to dispositions of partnership interests or S corporation stock, as well as sales of personal residences.

Planning opportunities exist to minimize the impact of this tax. If you have any questions or wish to discuss in greater detail, please contact:

Michael Fellerman at 301-961-5171 or mfellerman@linowes-law.com 

Jack Orrick at 301-961-5213 or jorrick@linowes-law.com 

Demetri Datch at 301-961-5164 or ddatch@linowes-law.com

Linowes and Blocher LLP has prepared this e-blast for general information purposes only, and the information contained in it does not constitute legal advice. This e-blast is not an offer to represent you and does not create an attorney-client relationship with Linowes and Blocher LLP or any of the firm's lawyers. You should not act, or refrain from acting, in a manner that changes your legal position based upon any information contained in this e-blast without first consulting with an attorney.