Understanding the Net Investment Income Tax, also known as the Medicare Contribution Tax

February 2013


While enacted in 2010 as part of the Patient protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, the new year triggered the effective dates for two new tax regimes on higher income taxpayers. The Net Investment Income Tax is a 3.8% tax on certain types of income that exceed threshold amounts that must be paid by individuals, estates and trusts. The second tax regime adds a 0.9% tax to the Medicare tax that is currently applied to earned income. This Insight touches on guidance found in the proposed regulations issued by the Internal Revenue Service and is intended to provide an executive summary of these new taxes and the complex reporting and documentation issues that must be addressed by affected taxpayers.

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