Currently, the 1.45% Medicare tax portion of Social Security tax applies to "earned income," such as wages, but not "unearned income." Effective in 2013, the new health care law creates two new taxes: 

*An additional 0.9% Medicare tax is imposed on earned income of joint filers above $250,000 ($200,000 for single filers).

 *A 3.8% Medicare tax is imposed on "net investment income" of joint filers with a modified adjusted gross income (MAGI) above $250,000 ($200,000 for single filers). For this purpose, net investment income includes interest, dividends, royalties, rents, gains from dispositions of property and passive activity income, but not distributions from qualified retirement plans and IRAs.

TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.