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Are You Ready for the New Investment Tax?
wsj ^ | April 27, 2013, 1:43 p.m. ET

Posted on 04/27/2013 3:27:19 PM PDT by BenLurkin

It's time to grapple with the new 3.8% tax on investment income.

The ordeal of 2012 taxes is barely over. But it isn't too early to understand and cushion the blow of the investment-income levy, which Congress passed in 2010 to help fund the health-care overhaul.

The tax, which took effect Jan. 1, applies to the "net investment income" of married joint filers who have more than $250,000 of income (or $200,000 for singles). Only investment income—such as dividends, interest and capital gains—above the thresholds is taxed. The rate is a flat 3.8% in addition to other taxes owed.

"Affluent investors who ignore this tax will be in for a total shock next April 15," says David Lifson, a certified public accountant specializing in tax at Crowe Horwath in New York. Such income is typically not subject to withholding, and people won't be factoring it into their estimated taxes. Lower-bracket taxpayers who receive a windfall large enough to owe the tax will also be in for a surprise.

The new levy is one of several tax increases taking effect this year, including higher top rates on income and capital gains, limits on deductions, and an extra 0.9% payroll tax. But the 3.8% tax will cost many Americans even more.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Government
KEYWORDS: income; investment; investmenttax; obamacare; tax; taxes

1 posted on 04/27/2013 3:27:19 PM PDT by BenLurkin
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To: BenLurkin
Most who are smart enough to earn "$250,000 of income (or $200,000 for singles)" from investments are also smart enough to keep income below the threshold, or defer the income (and taxes) until whatever time the adults return to Washington.

Following the "Law of Unintended Consequences", gov't revenues should decrease, not increase by 3.8%.

2 posted on 04/27/2013 3:36:17 PM PDT by Sooth2222 ("Suppose you were an idiot. And suppose you were a member of congress. But I repeat myself." M.Twain)
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To: BenLurkin

Guess my exit strategy for selling my company will need to be updated.


3 posted on 04/27/2013 3:41:02 PM PDT by driftdiver (I could eat it raw, but why do ithat when I have a fire.)
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To: BenLurkin
"Affluent investors who ignore this tax will be in for a total shock next April 15,"

Not to worry. I'll claim I'm a federal worker.. and if that doesn't do it.. I'll blame it on TurboTax.

4 posted on 04/27/2013 3:50:42 PM PDT by Track9 (hey Kalid.. kalid.. bang you're dead)
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To: BenLurkin

I liked the last avoidance strategy suggested by the article: die.


5 posted on 04/27/2013 3:54:33 PM PDT by TexasKamaAina
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To: Sooth2222

Turnover of capital assets will shrink enormously...just like capital that had been locked away for years was unlocked when Reagan lowered the capital gains tax rate. We’re 7 or 8 years away from retirement and have to rethink selling the house and downsizing...maybe lease the homestead for income rather than sell it and pay the bastards tax on my capital gains.

“Adults” returning to Washington? Really?


6 posted on 04/27/2013 3:54:52 PM PDT by ProtectOurFreedom
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To: ProtectOurFreedom
"We’re 7 or 8 years away from retirement and have to rethink selling the house and downsizing...maybe lease the homestead for income rather than sell it and pay the bastards tax on my capital gains."

With a little luck you might be able to trade the house to someone looking to upsize while you downsize. The cash difference would be less to tax.

7 posted on 04/27/2013 4:19:07 PM PDT by Average Al
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To: Average Al

LOL, I’m using “downsize” somewhat metaphorically here. Our house if 1,700 sq feet...just right for raising our family of three kids and for two of us in retirement. The truth is we’re just absolutely fed up with California insanity.


8 posted on 04/27/2013 4:26:30 PM PDT by ProtectOurFreedom
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To: BenLurkin
".... The rate is a flat 3.8% in addition to other taxes owed."

.... Translation ..... that is 3.8% less personal income for those people being taxed. In other words .... it is 3.8% less money being pumped into the US economy by these same people and thus shrinking that same economy by that same amount. This is what Liberals tout as an effort to help stimulate the economy ..... by taking 3.8% out of it.

Some people definitely have a strange and fantastic form of logic don't they? Unfortunately they are now the ones calling the shots!

9 posted on 04/27/2013 4:50:43 PM PDT by R_Kangel ( "A Nation of Sheep ..... Will Beget ..... a Nation Ruled by Wolves.")
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To: BenLurkin

so cap gains tax went from 15% to 20% to 24%... that ought to help the economy


10 posted on 04/27/2013 4:58:22 PM PDT by sten (fighting tyranny never goes out of style)
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To: driftdiver

too late


11 posted on 04/27/2013 5:34:22 PM PDT by Sequoyah101
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