The National Directory of Certified Public Accountants

Ask A CPA - Tax Law changes - 2013

3.8% Surtax Tax On Investment Income

The health care legislation enacted in 2013 included a new tax that was designed to affect upper income taxpayers. The 3.8 percent tax is imposed ONLY on those with more than $200,000 of adjusted gross income (AGI) ($250,000 on a joint return). The tax applies to investment income, defined as interest, dividends, capital gains and net rents. These items are all included in an individual’s AGI. The new tax does NOT eliminate the benefits of the $250,000/$500,000 exclusion on the sale of a principal residence. Thus, ONLY that portion of a gain above those thresholds is included in AGI and could be subject to the tax.

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