The Tribune Democrat, Johnstown, PA

Business

April 13, 2013

THOMAS SEITZ | Plan now for new surtaxes in 2013

— As you calculate your estimated federal tax for 2013, be sure to take into account two new surtaxes: The net investment income tax and the additional Medicare tax.

Here’s how to tell if they’ll affect you and what you can do  to blunt some of the impact.

• Net investment income tax. This 3.8 percent tax applies when you have investment income such as dividends, interest and capital gains, and your modified adjusted gross income exceeds $250,000 (for married filing jointly). When you’re single, the modified adjusted gross income threshold is $200,000.

Some types of income are not considered when computing your investment income for purposes of this tax. An example is tax-exempt interest.

Depending on your overall investment goals, purchasing municipal bonds may be an option to consider.

Retirement plan distributions, including withdrawals from your IRA, are not counted as investment income when figuring the tax. However, taking money from your accounts does increase your modified adjusted gross income.

Income from passive activities such as rental real estate is generally subject to the new tax. Depreciation deductions and a one-time opportunity to revise the way you group income from your rentals can offer some relief.

• Additional Medicare tax. This 0.9 percent surtax applies to wages, tips and self-employment income when your earned income exceeds $250,000, if you’re married filing a  joint return ($200,000 when you

are single).

Your employer is required to begin withholding the additional tax once you’ve earned $200,000, regardless of your filing status.

Other earnings, including wages earned by a spouse or from a second job, are not considered.

Depending on your total income, you may need to revise your W-4 or make quarterly estimated tax payments.

Thomas R. Seitz is a certified public accountant with Wessell & Co. of Johnstown.

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