Of course we all know the “wealthy” don’t pay their fair share … I jest.
Fact is there are not so obvious taxes everywhere, many targeted at higher income Americans. Take the Net Investment Income Tax (NIIT) as an example. That’s been around since 2013 and is used to help fund the Affordable care Act.
Most people need not worry about it, the NIIT only applies if your adjusted gross income is above $200,000 single and $250,000 married joint filers – not much of a bump for married couples on this one. Those amounts are not indexed so more Americans are paying the NIIT as time goes by.
The net investment income tax (NIIT) is a surtax of 3.8 percent imposed on an individual’s investment income such as interest, (including CDs and bank accounts), dividends, and capital gains in addition to the normal tax due. It also applies to the net gain on the sale of your home above the standard exemption. The tax generates over $60 billion a year in federal revenue.
If your marginal tax bracket is 24 percent and you are subject to the NIIT, you will pay a 27.8 percent tax on investment and interest income and you will pay an extra 3.8% on long-term capital gains and dividends above the standard 15% or 20%.
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The NIIT is really an unfair tax. $200K & $250K sounds like a very good income, but it depends where you live. In some of the higher cost of living states like NY CA HI NJ MD WA OR +… or the DC area you are not wealthy. Not indexing the NIIT to inflation is just like the $25K / $32K amounts used to see if you have to pay taxes on 50% of your SS income. We need to work with our elected officials to fix this indexing thing in all tax related formulas the IRS uses. The left should love the idea it will ensure everyone pays their FAIRSHARE.
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I did not know about NIIT but due to Roth Conversions it looks like I will be affected. Kind of defeats the purpose of seeking good interest rates for cash savings.
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