Two new taxes went into effect January 1, 2013 to help fund the Affordable Care Act. These two taxes will increase the amount of Medicare tax paid by certain high income earners. The first tax is a 3.8% Medicare tax on investment income; for purposes of this tax, investment income is defined as taxable interest and dividends, capital gains, annuity income, passive rental income and royalties. Distributions from retirement accounts and pensions are not considered investment income. The second new tax is a 0.9% tax on wages and self-employment income. The tax goes into effect when modified adjusted gross income is in excess of $200,000 for single filers and $250,000 for married filing joint filers.
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