4 Strategies to Reduce the Medicare Surtax
- Maximize your 401 (k) or employer sponsored retirement plan. Your pre-tax contributions will lower your taxable...
- Health Savings Account (HSA). If you select an HSA-eligible high deductible health insurance plan, you can contribute...
- Choose Municipal Bonds. Interest from tax-free municipal bonds is not subject to the...
- flexible spending accounts (FSA)
- health savings accounts (HSA)
- retirement accounts.
What is the Medicare surtax and how does it work?
Is there any way to reduce the tax? You can sell some securities at a loss to offset investment gains if you think you might be subject to the surtax this tax year. And when planning for the future, you can also choose investments that are naturally more tax-efficient. Offset gains through tax-loss harvesting. Choose tax-saving investments
What is the medicare surcharge tax?
Feb 27, 2013 · 9 Ways to Beat the Medicare Surtax. 1.) Municipal bonds — The President had proposed taxing the interest paid on state and local bonds issued after 2012. The final version of ATRA12 contained no changes to the taxation of municipal bonds. This might be a good time to shake the dust off your tax-free investing books.
Do I owe the medicare surcharge on investment income?
Mar 12, 2019 · One often overlooked benefit is an employer health savings plan or flexible spending account. Contributions use pre-tax dollars, reducing your taxable income. Develop a Charitable Giving Plan. Charitable giving can reduce your tax burden and also provide a sense of satisfaction by benefitting your favorite causes. Consider:
Do top taxpayers pay more Medicare surtax?
Mar 01, 2022 · Look for ways to minimize your AGI. The lower your AGI (the number at the bottom of the TAX-FORM 1040) the lower the amount of your income will be subject to the 3.8% surtax. Need another reason to contribute to your retirement plan? Making contributions to your 401k, 403b or pension will lower your AGI. You can also make charitable contributions from your IRA …
How do I avoid Medicare surtax?
What is the Medicare surtax for 2021?
Why did my Medicare surtax increase?
What is the 3.8 Medicare surtax?
What is Medicare surtax threshold?
How is Medicare surtax calculated?
Who pays Medicare surtax?
Both you and your employer pay the Medicare Tax as a part of FICA. Your total FICA taxes equal 15.3 percent of your wages — 2.9 percent for Medicare and 12.4 percent for Social Security. But if you are an employee, you only pay half of that. Your employer pays the other half.
Do I need to file Form 8959?
What is the 2021 standard deduction?
$12,550 for single filers. $12,550 for married couples filing separately. $18,800 for heads of households. $25,100 for married couples filing jointly.
Who pays the 3.8 investment tax?
Does the 3.8 Medicare surtax apply to capital gains?
Who pays the 3.8 Medicare tax?
Does Roth 401(k) raise taxes?
ROTH IRA to the rescue. Payment from a ROTH IRA or ROTH 401 (k) comes out tax-free and doesn’t raise taxable income. This can also help minimize the burden of the 3.8% surtax. This is where diversification of your retirement account taxation can really pay off.
Who is David Rae?
DAVID RAE, CFP®, AIF® is a Los Angeles-based retirement planner with DRM Wealth Management. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to the Advocate Magazine, Forbes.com, Huffington Post as well as the author of the Financial Planner Los Angeles Blog. Follow him on Facebook, or via his website www.davidraefp.com
What is Medicare surtax?
0 1 minute read. Medicare surtax is the additional Medicare tax that applies to taxpayers with income above a certain threshold. The income threshold depends on the filing status of the taxpayer. Medicare surtax was first introduced in 2010 with the Affordable Care Act of 2010 and applies to investment income.
What is Form 8960?
Form 8960, Net Investment Income Tax —Individuals, Estates, and Trusts is the tax form where you can calculate the net investment income earned. Upon figuring out your net investment income, you will need to attach it to Form 1040—your federal income tax return and pay the surtax.
How to calculate Medicare tax?
Step 1: Calculate the Additional Medicare Tax on any wages in excess of the applicable threshold for the filing status, without regard to whether any tax was withheld. Step 2: Reduce the applicable threshold for the filing status by the total amount of Medicare wages received, but not below zero.
What is additional Medicare tax?
The requirement is based on the amount of Medicare wages and net self-employment income a taxpayer earns that exceeds a threshold based on filing status.
Is Medicare tax indexed for inflation?
Medicare wages are reported on Form W-2 in box 5. As of tax year 2020, the threshold amounts aren't indexed for inflation. 2 They are: Filing Status.
How much does Barney earn?
Barney earned $75,000 in wages, which is below the $125,000 threshold for a married person filing separately, so he doesn't have wages in excess of the threshold amount. He doesn't have to pay any Additional Medicare Tax. But Betty's wages are $200,000.
What is net self employment income?
Net self-employment income is the total of all self-employment income after deductions for business expenses are taken on Schedule C, Schedule F, or Schedule E, which reports self-employment income from partnerships. The total self-employment income is then reduced by multiplying it by 92.35%.
What line is Medicare adjustment on 8959?
An adjustment can be made on Form 8959 beginning at line 10, if you're calculating the AMT on both self-employment income and wages. This adjustment functions to ensure that the Additional Medicare Tax is calculated only once on wages and only once on self-employment income when they're combined and exceed the threshold amount.
Who is William Perez?
William Perez is a tax expert with 20 years of experience who has written hundreds of articles covering topics including filing taxes, solving tax issues, tax credits and deductions, tax planning, and taxable income. He previously worked for the IRS and holds an enrolled agent certification.
