New 2013 Medicare Surtaxes

Many individuals that will be impacted are still not aware of the new Medicare surtaxes for 2013.  I know this because of several conversations that I have had with non-clients or new clients in the past few months.  While there may not be a lot that individuals can do about it, they can at least plan for the impacts.  There may also be unique circumstances where the timing of sales and income can be optimized in order to minimize the impacts.  The details of that really need to be discussed with a CPA or other tax professional. 

One of the new Medicare surtaxes is the 3.8% surtax that will be imposed on investment income in 2013 for individuals that have joint income (from any sources) of $250,000 or more ($200,000 or more for most other filing status, $125,000 for married filing separately).   This will surtax will most commonly apply to income such as interest, dividends, rental income, capital gains, and passive business activities.

The other .9% Medicare surtax will be imposed on earned income above certain thresholds.  For married couples that threshold is $250,000.  For other filing statuses the threshold is $200,000 except for Married Filing Separately where the threshold is $125,000.  If the earnings are via wages to one individual then the employer would typically withhold the .9% surtax.  However, if it is from earned income or via a combination of spouses may not have the additional surtax withheld.  That being said, the impact from this surtax is not as noticeable- if a couple has $300,000 in earned income the surtax would be $450. 

Let us know if you have any questions specific to these, new for 2013, Medicare surtaxes.