The Internal Revenue Service and the Treasury Department have issued a set of proposed regulations on the 3.8 percent Net Investment Income Tax that takes effect next year as a result of the health care reform law, along with a FAQ page with questions and answers.
The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts, the IRS noted. It takes effect on Jan. 1, 2013. The threshold amount is $250,000 for taxpayers who are married filing jointly, $125,000 for taxpayers who are married filing separately, $200,000 for single taxpayers, $200,000 for a head of household with a qualifying person, and $250,000 for a qualifying widow or widower with a dependent child.
The threshold amounts are not indexed for inflation, the IRS noted. Nonresident aliens are not subject to the new tax.
Estates and trusts will be subject to the Net Investment Income Tax if they have undistributed net investment income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins for the taxable year. For tax year 2012, the threshold amount is $11,650. There are special computational rules for certain types of trusts, such as charitable remainder trusts and electing small business trusts, which can be found in the proposed regulations.