Hello Gurus-

I'd like to seek your guidance on my questions regarding "medicare surtax" (of 3.8%):

Is this tax applicable to an individual who has retired and has no "earned income" (but may have social security benefits and/or net investment income)?

If yes, how will this tax be paid since there is no earned income (hence no tax witholding from wages)?

What if the same individual is married and his spouse has earned income. Will the surtax be applicable only only the spouse?

Thank you for your help.

#1; Beginning in 2013, higher-income taxpayers will be subject to an additional tax on earned income and a new 3.8% tax on investment income; An additional 0.9 percent Medicare tax is imposed on wages, compensation and self-employment earnings above a threshold amount,.Medicare wages and self-employment income are combined to determine if income exceeds the threshold. A self-employment loss is not considered for purposes of this tax. RRTA compensation is separately compared to the threshold.



#2;This tax, the unearned income Medicare contribution tax (UIMCT), is equal to 3.8% of the lesser of: (1) Your net investment income (generally, net income from interest, dividends, annuities, royalties and rents, capital gains and income from a business that is considered a passive activity) or (2) yourMAGI



#3;This tax will apply to net investment income of taxpayers to the extent their net investment income and their MAGI, including their net investment income, is in excess of the threshold amounts discussed above. however, the term basically includes most dividends, interest, annuities, royalties, rents and the taxable portion of gains from the sale of property. Gains or losses from the disposition of partnership or S Corp interests are generally not subject to this tax, except to the extent the pass-thru entity would have generated gain or loss if it had sold all of its assets immediately before the sale of the pass-thru interest Qualified plan distributions and any income items subject to self-employment tax are not treated as net investment income subject to this surtax. The 3.8% surtax is imposed on the lesser of an individual’s:
1) “net investment income” (NII), or
2) the excess of “modified adjusted gross income” over $250,000 (for married filing jointly)

Thank you for your prompt and helpful response. Happy New Year.

thank you; you too. happy new year~