Mimi Nolan, Dir., Tax Forms Mgmt., and, Bob Erickson, Senior Tax

CERCA Spring Meeting 2013
Additional Medicare Tax and Net
Investment Income Tax
Presented By
Mimi Nolan | Director, The Tax Institute at
H&R Block
Bob Erickson | Senior Tax Advisor at
On-Line Taxes, Inc.
Additional Medicare Tax
• The Additional Medicare Tax (IRC sections 1401(b)(2) and
3101(b)(2)) applies to individuals’ wages, other compensation,
and self-employment income over the applicable threshold;
employers are responsible for withholding the tax on wages
and other compensation in certain circumstances.
• The rate of the Additional Medicare Tax is 0.9 percent.
• The applicable threshold is: $250,000 if married filing jointly;
$125,000 if married filing separately; and $200,000 for all
other filing statuses.
Additional Medicare Tax (continued)
• An employer must withhold Additional Medicare Tax from
wages it pays to an individual in excess of $200,000 in a
calendar year, without regard to the individual’s filing status
or wages paid by another employer. An individual may owe
more than the amount withheld by the employer, depending
on the individual’s filing status, wages, compensation, and
self-employment income.
• New Form 8959, Additional Medicare Tax, is used to report
the tax (unless fully withheld by an employer), which is
carried to page 2 of Form 1040
Net Investment Income Tax
• The Net Investment Income Tax (IRC section 1411) applies to
the lesser of (1) net investment income or (2) modified AGI
minus the applicable threshold.
• The rate of the Net Investment Income Tax is 3.8 percent.
• The applicable threshold is $250,000 if married filing jointly or
qualifying widow(er); $125,000 if married filing separately;
and $200,000 for all other filing statuses.
• Net investment income generally includes non-business gross
income from interest, dividends, annuities, royalties, rents,
and net gain from the disposition of non-business property
(reduced by deductions attributable to such income gross
income or net gain).
Net Investment Income Tax
• Modified AGI is AGI increased by net foreign earned income
excluded under section 911.
• New Form 8960, Net Investment Income Tax, is used to report
the tax, which is carried to page 2 of Form 1040.
• The tax also applies to estates and trusts – the tax is imposed
on the lesser of (1) undistributed net investment income or
(2) AGI minus $11,950.
Additional Information
The IRS website has more detailed information on both taxes.
 Additional Medicare Tax:
 Net Investment Income Tax:

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