The New 3.8-Percent Tax Applies To Trusts And Estates

As we noted in a prior Estate Planning Update, 2013 brought with it a new 3.8-percent Medicare Contribution Tax on net investment income (interest, dividends, annuities, royalties, rents, capital gains, and passive activity income) for higher-income taxpayers. The new tax effectively increases the marginal tax rate on some investment income to 43.4 percent. While the new tax is intended to apply only to high-income taxpayers ($200,000 gross income for single individuals, and $250,000 for married taxpayers filing jointly), the tax kicks in for trusts and estates at only $11,950 of gross income. Therefore, it is important to determine whether trusts and estates with even moderate incomes should be making...