The 3.8% solution … here comes the tax pile-on.

Taxes will be going up … thanks to  ObamaCare and Justice Roberts.

Flashback: ObamaCare’s initial $1 trillion cost projections (which have already doubled) … were funded (on paper, that is) roughly half by cuts to Medicare and half by tax increases.

One of the tax increases is a 3.8% tax on investment income … essentially slapping payroll taxes on so-called “unearned income”.

“Unearned income” is more than dividends and capital gains.

According to the WSJ

The tax applies to:

  • dividends;
  • rents;
  • royalties;
  • interest, except municipal-bond interest;
  • short- and long-term capital gains;
  • the taxable portion of annuity payments;
  • income from the sale of a principal home;
  • a net gain from the sale of a second home;
  • passive income from real estate and investments, such as limited partnerships.

The tax does not apply to:

  • payouts from a regular or Roth IRA, 401(k) plan or pension;
  • Social Security income; or annuities that are part of a retirement plan.
  • life-insurance proceeds;
  • municipal-bond interest;
  • veterans’ benefits; Schedule C income from businesses

Also, the tax does not apply to  non-resident aliens.

Couple of mega-takeaways:

1) Municipal bonds benefit … not subject to the ObamaCare surcharge … and don’t count towards the $250k AGI trigger.

2) Renters lose … landlords are likely to pass along the surcharge to higher rents

3) Housing prices pressured … double-whammy … higher cap gains taxes make houses less attractive as investments … rents tax decreases motivation for investors to buy and rent homes.

4) Seniors lose … if they shifted their retirement portfolios to fixed incomes … since interest and dividends get hit … dividends especially since they’ll also get hit with an increase in income tax rates — from 15% to as high as 39.5%

At least our health insurance premiums are going down … NOT !Could be worse … our health insurance premiums could be going up … oops, they are.

Oh well …

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2 Responses to “The 3.8% solution … here comes the tax pile-on.”

  1. Pssst: Your taxes are going up on January 1 … even if you’re not a millionaire or billionaire. « The Homa Files Says:

    […] written about this one before … see The 3.8% solution … here comes the tax pile-on for […]

  2. Happy New Year … Your taxes went up at midnight. « The Homa Files Says:

    […] written about this one before … see The 3.8% solution … here comes the tax pile-on for […]

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