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ObamaCare brings additional Medicare tax if income over $200,000 or $250,000

By Dian Vujovich

Even though not everyone seems to know it yet, ObamaCare has been in place and working just fine for millions for the past three and one-half years. Something else everyone might not know is that when tax time rolls round  those with higher incomes will have to cough up some additional tax monies.


While there has been plenty of squawking about ObamaCare and repeated tales of untruths about how horrible it is, I’ve yet to hear one complainer come up with a better idea about how to provide reasonably priced health care to our citizens. Or, share ideas about how to improve the plan that’s already in place.  Oh well, maybe someday.


In the meantime, come April 15th many will  face  Medicare-related tax increases. Figuring out how much one’s share will amount to can be about as confusing as trying to understand  the 2000-plus page Act or  any IRS ruling.


That said, I ran across an article written by Neil B. Brown, a CPA and CFP who wrote a piece about the Medicare tax increase for The State, a South Carolina newspaper.


Brown points out in his piece titled, “New health care law will affect tax rates this year”, that there has been confusion about the tax consequences of ObamaCare.  And, that there are two taxes that come into play, not one. One tax relates to gross income and the other, earned income.


He writes: “The first tax is a 3.8 percent Medicare surtax assessed on investment income of individuals with adjusted gross incomes greater than $200,000 if filing as single for taxes or $250,000 if filing married jointly. Many commentators mistakenly make it appear as if this tax will affect anyone above these income thresholds. However, there is a second calculation involved: The tax is calculated on the lesser of either those set income levels or net investment income.”


The second tax is an addition .9 percent Medicare tax.


Here’s the example Brown uses in the piece: “As an example to demonstrate both taxes, assume we are discussing a married couple filing a joint tax return with combined wages of $260,000 and net investment income of $15,000. For simplicity purposes, the combined gross income is $275,000. How do the taxes apply? The net investment income tax is calculated as the lesser of either the amount of gross income – $275,000, which exceeds the $250,000 threshold by $25,000 – or the amount of investment income of $15,000. In this case, the tax applies to $15,000 and there would be an additional 3.8 percent tax on $15,000 or $570. The second tax would apply to the amount of earned income in excess of $250,000. In this case, the earned income is $260,000, therefore the .9 percent tax applies to $10,000 for an additional tax of $90.”


The ObamaCare tax increase for Medicare part A represents a payroll tax of 2.35 percent —that’s up from the current level of 1.45 percent—- for individuals earning over $200,000 a year and married couples making more than $250,000.


To read Brown’s column visit: http://tinyurl.com/n47f5jf


To learn more from the IRS regarding ObamaCare Medicare taxes visit: http://tinyurl.com/8dx6yhc .

To read more articles, please visit the column archive.

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