What Income Is Subject To The 3.8 Medicare Tax?

What income is not subject to Medicare tax?

Also, qualified retirement contributions, transportation expenses and educational assistance may be pretax deductions.

Most of these benefits are exempt from Medicare tax, except for adoption assistance, retirement contributions, and life insurance premiums on coverage that exceeds $50,000..

What is the Medicare tax on investment income?

3.8%The Medicare surtax applies to taxpayers above certain income thresholds. If the surtax applies to you, you’ll owe an additional 3.8% tax rate on your investment income.

How do you avoid net investment income tax?

Strategies to Reduce Your Modified Adjusted Gross Income:Invest more taxable investment funds in municipal bonds. … Invest taxable investment funds in growth stocks. … Consider conversion of traditional IRA accounts to ROTH accounts. … Invest in life insurance and tax-deferred annuity products. … Invest in rental real estate.More items…•

Who is exempt from net investment income tax?

Trusts that are exempt from income taxes imposed by Subtitle A of the Internal Revenue Code (e.g., charitable trusts and qualified retirement plan trusts exempt from tax under section 501, and Charitable Remainder Trusts exempt from tax under section 664).

What income is subject to 3.8 Net investment tax?

Find out if Net Investment Income Tax applies to you The statutory threshold amounts are: Married filing jointly — $250,000, Married filing separately — $125,000, Single or head of household — $200,000, or.

How does the 3.8 Medicare tax work?

The Medicare tax is a 3.8% tax, but it is imposed only on a portion of a taxpayer’s income. The tax is paid on the lesser of (1) the taxpayer’s net investment income, or (2) the amount the taxpayer’s AGI exceeds the applicable AGI threshold ($200,000 or $250,000).