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And So It Begins…Taxmageddon

By July 11, 2012October 24th, 2018Estate Planning Blog, Robert Lamm
Bob Lamm

Robert Lamm

For some time I’ve been warning my clients about “Taxmageddon.”  Taxmageddon is the term describing the onslaught of tax increases set to begin on January 1, 2013, upon the expiration of the Bush Era tax cuts. Much has been said about this already, so I won’t belabor the point.  What many do not know, however, is that in addition to higher income tax, gift tax, and estate taxes, Obamacare piles on an additional twenty-one new taxes alone!  One of them in particular caught my attention – the 3.8% surtax on investment income that will be used to provide everyone with all this free stuff.

Here is how it works, if you have adjusted gross income above $250,000 ($200,000 for single filers), there will be a 3.8% surtax on your investment income.  The IRS still has not published guidance, but investment income will probably include things such as sales proceeds from investments, rent, interest, royalties, and dividends.  It will most likely not include municipal bond interest, social security payments, life insurance death benefits, and distributions from qualified plans and/or annuities.

What should you do in the meantime? Consult your tax advisor and consider accelerating your income in 2012 if you are concerned that this tax will apply to you.