Obama Care and medicare tax

[Anonymous]

Q. Obamacare Tax:

Medicare Tax is on earned income, income from investment income is NOT subject to medicare Tax. Tax is 1.45 +1.45 = 2.9%? correct?

Is this Obamacare tax ONLY on income "over" 200k/250K single/married OR once your total income (income from all sources) hit that threshold then all of your income (0 till infiniti) wages and investment income become subject to 3.8 Tax? Which income, AGI or MAGI or which line item on 1040?

Q. What are exclusions to Obamacare Tax? Muni interest? All of it or from your state muni only?

Does distributions from K1, subject to Obama care? Remember these distributions are NOT reported along with dividends as they reduce cost basis of original investments? What about income which is reported on K1/part 3 which you do have to enter on K1 and it is your share of income or losses but you don't actually get income.

Q.  Obama care taxes both earned income/wages and investment income and it has 2 parts. Which kind of investment income are used or NOT used first to calculate threshold of [removed] (single/married/married separate filing) and then which kind of investment income are NOT subject to that 3.8% tax?

[Critter-3]

Read all about it in the form 8960 form & instructions   https://www.irs.gov/forms-pubs/about-form-8960

[Anonymous]

Thanks, any short answers? It is too long almost like taking like taking tax course?

[macuser_22]

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@Anonymous wrote:

Q. Obamacare Tax:

Medicare Tax is on earned income, income from work and investment income is NOT subject to medicare Tax. Tax is 1.45 +1.45 = 2.9%? correct?

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Your question does not make sense.  income from"work" is earned income subject to both medicare and Social Security tax.     investment income is not.

[VolvoGirl]

Will any of these help?

What is Form 8960

https://ttlc.intuit.com/community/forms/help/what-is-form-8960/00/26274

IRS info on Net Investment Income Tax

https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax

IRS Info on the Additional Medicare tax on high earners (for wages)

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additio...

[Anonymous]

thanks for pointing that out. Obama care tax is meant for Healthcare and it is sort of extension of medicare (I think).

Lets say someone has only income is from work/wages-W2 income/earned income. That person pay 2.9% (1.45 + 1.45) Medicare Tax until 200/250/125 limit but once crosses that limit then this tax becomes 3.8% (0.9% increase). That 0.9% comes from tax payer not employer?

Q. Is now all of their income is subject to 3.8% because they have reached important milestone or income above threshold is subject to 3.8% and income below is subject to 2.9%

Now lets say some one only source of income is passive income like from stocks, dividends, capital gains (I am not sure about rental or royalities income etc). That person has NO Medicare tax until that person reaches 200/250/125 threshold.

That is my question. Now if you reaches threshold, does only income above threshold is subject to 3.8% tax or all of your income is now subject to 3.8% tax.

[VolvoGirl]

The 1.45% Medicare tax is only for the employee.  If you get a W2 you only pay 1.45%.   The employer also pays 1.45%.  Or do you have self employment income?

[Anonymous]

thanks, understood, that's why I split 2.9 (1.45+1.45) to show 2 entities (taxpayer and employer split the tax)?

[Anonymous]

Could someone please answer this basic question?

Now lets say some one has only source of income via passive income like from stocks, dividends, capital gains (Net investment income). That person has NO Medicare tax until that person reaches 200/250/125 threshold.

Q. That is my question. Now if you reaches/crosses threshold, does only income above that threshold is subject to 3.8% tax or all of your income is now subject to 3.8% tax?

IRS website link about NIIT only talk about threshold and 3.8% tax but it is not clear to me if ONLY income above threshold or all of income is subject to 3.8% tax after reaching threshold.

[macuser_22]

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@Anonymous wrote:

Could someone please answer this basic question?

Now lets say some one has only source of income via passive income like from stocks, dividends, capital gains (Net investment income). That person has NO Medicare tax until that person reaches 200/250/125 threshold.

No.  If your only income is investment income then there is never any medicare tax reguardless of the amount of income.   Medicare tax only applies to employment income - either W-2 or self-employed.

The "200/250/125 threshold" you refer to is when your W-2 box 5 amount plus Self-employed income on Schedule SE part 1, line 6 exceed those amounts.   It has nothing to do with investment income whatsoever.