TAG Tax

Contact: Reid and Riege, P.C. (Connecticut, USA)

Legislated as part of the Health Care and Education Reconciliation Act of 2010, the companion to the Patient Protection and Affordable Care Act of 2010 (or ObamaCare), the Unearned Income Medicare Contribution Tax imposes on individuals (as well as estates and trusts, not discussed here) a 3.8% surtax on net investment income (the "Net Investment Income Tax" or "Surtax").

The Net Investment Income Tax is a true surtax because it is levied on top of an individual's ordinary income or capital gains taxes, as applicable. It is not, however, a source of revenue to fund Medicare as is pointed out by the Joint Committee on Taxation: "No provision is made for the transfer of the tax imposed by this provision from the General Fund of the United States Treasury to any Trust Fund." The Internal Revenue Service cut to the chase and used the phrase Net Investment Income Tax on its Form 8960 (when the draft becomes final).

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