Impact of new Medicare contribution tax on real estate investments

January 2013
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Impact of new Medicare contribution tax on real estate investments

At a glance

This alert summarizes the mechanics of the 3.8% Medicare Contribution Tax and its impact on U.S. investors with domestic and/or foreign real estate investments.

The Medicare Contribution Tax (“MCT”), which was enacted under the Health Care and Education Reconciliation Act of 2010 (the “Act”), is a 3.8-percent tax on certain income received by individuals, trusts and estates. Historically, Medicare and employment taxes have been assessed on wages and earned income. The MCT differs from other Medicare taxes in that it will be assessed on certain unearned passive investment income received by taxpayers.