LifeAudit Financial Corner – June 2014

Andrew Shamp

By: Andrew Shamp, Guest Contributor

If you had investment income in 2013, there may be something in your recently filed tax return that you weren’t expecting – an additional 3.8% tax. For individual taxpayers with adjusted gross income (“AGI”) over $200,000 and joint filing taxpayers with adjusted gross income above $250,000 the Affordable Care Act created an additional tax on investment income of 3.8%. The tax is levied on the lesser of 1) net investment income, and 2) the amount by which their AGI exceeds the threshold limit of $200,000 or $250,000 respectively. Investment income specifically includes gross income from interest, dividends, annuities, royalties, and rents.  Investment income does not include distributions from qualified retirement plans, IRAs, gain on the sale of certain business interests, active trade or business income, or any income taken into account for self-employment tax purposes. The surtax became effective after December 31, 2012.

Considering this new surtax on investment income and the additional tax burdens placed on high wage earners contained in the American Taxpayer Relief Act of 2012, it has become increasingly important to consider taxation when making investment and financial decisions. The sticker shock individuals are experiencing after reviewing their 2013 tax returns has resulted in an increased interest in tax-favorable strategies such as maximizing qualified plan contributions, implementing non-qualified deferred compensation plans, and contributing to charitable remainder trusts. In addition, the tax-favorable treatment of cash value life insurance has become more popular in the current tax environment.  The cash values inside life insurance policies grow on a tax-deferred basis and when designed correctly may be withdrawn free of income taxes. The new 3.8% surtax discussed above does not apply to life insurance cash values.

For more information on the 3.8% surtax and how to reduce your exposure, please contact Andrew Shamp at (561) 948-2425, or visit 

Disclaimer: The Florida Healthcare Law Firm does not receive any compensation for running articles such as this one. Our only aim is to ensure that our clients receive helpful information from reliable sources. 

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