New Federal Investment Income Tax Takes Effect January, 2013
Federal Investment Income Tax
Beginning January 1, 2013, a new 3.8% federal tax on some investment income will take effect. This tax was part of the Affordable Care Act (Obama Care) and was intended to help fund the new health care and Medicare overhaul plans. This tax will not be imposed on all real estate transactions, which is a common misconception. When the legislation becomes effective on January 1, 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses).
The new tax will fall only on individuals with and adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI. If your sole livelihood is derived from owning and operating commercial property, then the rental income is from a trade or business and is not treated as investment income. Please check with your tax advisor to better understand how this new tax may affect you or your company.