Another tax from the Affordable Care Act (Obamacare) will go into effect on January 1, 2013 and it may have an impact on the middle class and those grieving a loss of a loved one. As part of the funding mechanism for benefits, Congress imposed a 3.8% Medicare surtax on passive income if an individual makes more than $200,000 or $250,000 for a couple, or what will be the highest marginal tax bracket for the taxpayer. The surtax is imposed on passive income, when previously, Medicare and Social Security were only imposed on earned wages.
How does this affect trusts? Well, since a trust or estate cannot income, prior to January 1, 2013, the entity was exempt from any of these “payroll taxes”. Under the law, though, the passive income (investments, interest, etc.) will be subject to the additional surtax when the trust or estate reaches the highest marginal rate at $12,000.
It is fairly easy to plan around paying income taxes through a trust or estate, but those without proper planning may find that the legacy left to them by their loved ones subject to up to nearly 50% in taxes when Oklahoma taxation is included. This is after estate taxes of up to 55% are taken out. If you want to plan for these taxes, then call my office to set up an appointment.