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How to Plan for the One Tax Certainty in 2013: the 3.8% Medicare Surtax

Right now, nothing much seems certain when it comes to taxes we can plan for in 2013 and we likely won't know more until after the Nov. 6 election. However, there is one new tax many of us will see in 2012: the 3.8 percent Medicare surtax that will be used to offset the expanded costs of Obamacare.

The new surtax will be applied according to income level as follows:

  • Married taxpayers, filing jointly: $250,000
  • Married taxpayers, filing separately: $125,000
  • All other individual taxpayers: $200,000

The types of income that will be subject to the 3.8% surtax include interest income, dividends, annuities, royalties, some rents, capital gains from property not used in an active trade or business, and the trading of commodities and financial instruments.

There are estate planning strategies that those who may be subject to the surtax can use, but the time to plan is now. An Irvine estate planning lawyer may recommend:

  • Converting traditional IRAs to a Roth
  • Making investments in tax exempt bonds
  • Gifting to individual beneficiaries who are not subject to the surtax
  • Gifting to charity
  • For estates and trust, choosing a tax year beginning in 2012 instead of 2013
  • Creating above-the-line deductions

The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0042.

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