Net Investment Income Tax – Do I Owe It?

New Tax Rate 3.8% Net Investment Tax

Effective Jan. 1, 2013, individual taxpayers are liable for a 3.8 percent Net Investment Income Tax on the lesser of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory threshold amount based on their filing status.

The statutory threshold amounts are:

  • Married filing jointly — $250,000,
  • Married filing separately — $125,000,
  • Single or head of household — $200,000, or
  • Qualifying widow(er) with a child — $250,000.

In general, net investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.

Net investment income generally does not include wages, unemployment compensation, Social Security Benefits, alimony, and most self-employment income.

Additionally, net investment income does not include any gain on the sale of a personal residence that is excluded from gross income for regular income tax purposes. To the extent the gain is excluded from gross income for regular income tax purposes, it is not subject to the Net Investment Income Tax.

If an individual has too little withholding or fails to pay enough quarterly estimated taxes to also cover the Net Investment Income Tax, the individual may be subject to an estimated tax penalty.

The Net Investment Income Tax is separate from the new Additional Medicare Tax, which also went into effect on January 1, 2013.  You may be subject to both taxes, but not on the same type of income. The 0.9 percent Additional Medicare Tax applies to individuals’ wages, compensation, and self-employment income over certain thresholds, but it does not apply to income items included in Net Investment Income.

For additional information on Net Investment Income Tax, see our questions and answers posted on

Premium Tax Credit for Health Insurance


The Premium Tax Credit

Facts about the Premium Tax Credit

Publication 5120 –Your Credit, Your Choice – Get it Now or Get it Later

Publication 5121 –Need help paying for health insurance premiums?


Basic Information

Starting in 2014, if you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit. This tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. The open enrollment period to purchase health insurance coverage for 2014 through the Marketplace runs from Oct. 1, 2013, through March 31, 2014.

The Department of Health and Human Services administers the requirements for the Marketplace and the health plans they offer. For more information about your coverage options, financial assistance and the Marketplace, visit


In general, you may be eligible for the credit if you meet all of the following:

  • buy health insurance through the Marketplace;
  • are ineligible for coverage through an employer or government plan;
  • are within certain income limits;
  • file a joint return, if married; and
  • cannot be claimed as a dependent by another person.

If you are eligible for the credit, you can choose to:

  • Get It Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or
  • Get It Later: wait to get all of the credit when you file your 2014 tax return in 2015.

Getting the Credit

To qualify for the credit, you must get insurance through the Marketplace.

During enrollment through the Marketplace, using information you provide about your projected income and family composition for 2014, the Marketplace will estimate the amount of the premium tax credit you will be able to claim for the 2014 tax year that you will file in 2015.

You will then decide whether you want to have all, some or none of your estimated credit paid in advance directly to your insurance company.

Change in Circumstances

Report income and family size changes to the Marketplace throughout the year. Reporting changes will help make sure you get the proper type and amount of financial assistance and will help you avoid getting too much or too little in advance. Receiving too much or too little in advance can affect your refund or balance due when you file your 2014 tax return in 2015.

For example, if you do not report income or family size changes to the Marketplace when they happen in 2014, the advance payments may not match your actual qualified credit amount on your federal tax return that you will file in 2015. This might result in a smaller refund or balance due.

Claiming the Credit on Your Federal Tax Return

For any tax year, if you receive advance credit payments in any amount or if you plan to claim the premium tax credit, you must file a federal income tax return for that year.

If you choose to get it now: When you file your 2014 tax return in 2015, you will subtract the total advance payments you received during the year from the amount of the premium tax credit calculated on your tax return. If the premium tax credit computed on the return is more than the advance payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. If the advance credit payments are more than the premium tax credit, the difference will increase the amount you owe and result in either a smaller refund or a balance due.

If you choose to get it later: You will claim the full amount of the premium tax credit when you file your 2014 tax return in 2015. This will either increase your refund or lower your balance due.

More Information

More detailed information about the credit is available in our Questions and Answers.
The Department of the Treasury and the IRS issued the following legal guidance related to the premium tax credit:

  • Final regulations on the rules for individuals who enroll in qualified health plans through Marketplaces and claim the premium tax credit.
  • Final regulations on the premium tax credit affordability test for related individuals.
  • Proposed regulations on determining minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit.
  • Notice 2013-41 on determining whether or when individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP, TRICARE, student health or state high risk pool programs.

An electronic flyer (Publication 5120) and trifold (Publication 5121) entitled “Facts about the Premium Tax Credit” are available for public use and distribution.

Retirement Plans for Employers

Saving for Retirement

Retirement plans for your small business – Links to types of plans, a publication with a comparison chart, a webcast and an interactive website to help you choose

SEP Plans

  • You can still set up a SEP by the due date (including extensions) of your 2013 business income tax return
  • Employees for SEP plans includes those of all related employers – SEP Fix-It Guide


  • Tips for the sole proprietor – where to deduct, when to contribute and how to calculate the owner’s contributions
  • 3% matching contribution is based on unlimited compensation but 2% nonelective is limited to annual amount

Saver’s Credit – You may qualify for the Saver’s Credit of up to $2,000 for contributing to an IRA or company retirement plan, and you have until April 15, 2014, to make 2013 IRA contributions

Safe-harbor 401(k) notice – How to correct if you’ve either failed to give participants the annual notice or didn’t give it to them on time

Mark your calendar – retirement plan deadlines

Roth account in your retirement plan – if you participate in a 401(k), 403(b) or governmental 457(b) plan, consider your Roth options

Savvy Senior Alert – RMD Deadline

RMD To Do List ReminderSavvy Senior Alert – If you turned 70 1/2 during 2013, don’t forget to take your Required Minimum Distribution (RMD) by April 1, 2014 to avoid paying additional taxes.

Tips for Taxable and Nontaxable Income

taxes made from moneyAre you looking for a hard and fast rule about what income is taxable and what income is not taxable? The fact is that all income is taxable unless the law specifically excludes it.

Taxable income includes money you receive, such as wages and tips. It can also include noncash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance proceeds paid to you are usually not taxable. But if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income from a qualified scholarship is normally not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. However, amounts you use for room and board are taxable.
  • If you got a state or local income tax refund, the amount may be taxable. You should have received a 2013 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some types of income that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

For more on this topic see Publication 525, Taxable and Nontaxable Income. You can get it at or call to have it mailed at 800-TAX-FORM (800-829-3676).
Additional IRS Resources:

IRS YouTube Videos:

Olympic Inspiration

Olympics 2014Let yourself be inspired with my guest writer, Marlene Kattaron, and her excellent article on Olympic Inspiration.

Have you watched any of the Olympic Games?  I really hadn’t paid much attention to the hoopla of the games—I didn’t watch the opening ceremony and I didn’t even watch any events until several days into the games, mainly because I don’t watch TV much.  A few of my co-workers were really excited about them and almost made me feel like I wasn’t living up to my patriotic duty as an American for not having watched any of it yet.

When I caught some of the Olympic action, I understood the feeling that my co-workers experienced.  Watching these athletes is not the same as watching the Super Bowl, the World Series, Wimbledon or even the Final Four.  Though there’s nothing wrong with watching any of these top sporting events, it seems that the playing field for the Olympics sets a different, and perhaps a higher significance.

The level of excitement seems so much higher, the enthusiasm so much more intense, every chance at the gold but just a few fleeting moments of expression of athletic prowess.  Hours and hours of commitment, years and years of dedication for the chance at gold—gold that can turn to silver, bronze or air over mere tenths of a second.  It almost doesn’t seem fair.  After all, aren’t all of the competitors top athletes?  Yes!  But only one can earn the gold.  Notice that I did not say “win” the gold.  You don’t win the gold, you earn it.

olympic Inspiration

“Luck has nothing to do with it, because I have spent many, many hours, countless hours, on the court working for my one moment in time, not knowing when it would come.”  -Serena Williams, Winner of 2 Gold Medals at 2000 and 2008 Olympic Games

“… playing sports is not about winning gold medals. It’s about self-esteem, learning to compete and learning how hard you have to work in order to achieve your goals.”–Jackie Joyner-Kersee, member of the International Women’s Sports Hall of Fame and three-time Olympic gold medalist in track and field

“I am building a fire, and every day I train, I add more fuel. At just the right moment, I light the match.  -Mia Hamm (American football player, 2004 Summer Olympics)

“There is no mat space for malcontents or dissenters.” -Dan Gable, former Olympic wrestling champion 

 “The Olympics remain the most compelling search for excellence that exists in sport, and maybe in life itself.” -Dawn Fraser (Australian swimmer, 3-time winner at the Olympics)

 “It is the inspiration of the Olympic Games that drives people not only to compete but to improve, and to bring lasting spiritual and moral benefits to the athlete and inspiration to those lucky enough to witness the athletic dedication.” -Herb Elliott, Winner of Gold Medal at 1960 Olympic Games

“It took me time to realize that the men who won Olympic gold medals in the decathlon are just men, just like me.” -Dan O’Brien, Gold Medalist at 1991, 1993, 1995 and 1996 Olympic Games

We don’t all have the gifts or talents to become athletic champions, but there is one thing that is certain—we all have the choice to become champions of our own lives!  We must do what is necessary to set and achieve our goals.  It is easy to live by excuses or blame and it is much more challenging to “do.”  Doing what is necessary and right even though you don’t want to, is what separates excellence from mediocrity.  I hope you have an excellent day! –Marlene Kattaron

 Marlene Kattaron is an independent marketer for the licensed public utility company, Stream Energy.  As an Ignite Associate (marketing arm of Stream), Marlene helps people save money on gas and/or electric services for residential and commercial service.  She is able to personalize your service with unsurpassed individualized customer service.  Stream Energy’s motto is, “Be my friend.  Give me your business.  And Save.”  Marlene also helps people earn money through professional network marketing and team building for those interested in earning additional income on life-essential services.  If you would like to learn more about Ignite or Stream Energy, you may contact Marlene at 404-403-2793 or

Choosing the Right Filing Status for Tax Filing

1040 Tax ReturnUsing the correct filing status is very important when you file your tax return. You need to use the right status because it affects how much you pay in taxes. It may even affect whether you must file a tax return.

When choosing a filing status, keep in mind that your marital status on Dec. 31 is your status for the whole year. If more than one filing status applies to you, choose the one that will result in the lowest tax.

Note for same-sex married couples. New rules apply to you if you were legally married in a state or foreign country that recognizes same-sex marriage. You and your spouse generally must use a married filing status on your 2013 federal tax return. This is true even if you and your spouse now live in a state or foreign country that does not recognize same-sex marriage. See and the instructions for your tax return for more information.

Here is a list of the five filing statuses to help you choose:

1. Single.  This status normally applies if you aren’t married or are divorced or legally separated under state law.

2. Married Filing Jointly.  A married couple can file one tax return together. If your spouse died in 2013, you usually can still file a joint return for that year.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns instead of one joint return. This status may be to your benefit if it results in less tax. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  This status normally applies if you are not married. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Some people choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  If your spouse died during 2011 or 2012 and you have a dependent child, this status may apply. Certain other conditions also apply.

You can also find the rules on this topic in Publication 501, Exemptions, Standard Deduction, and Filing Information. It’s available on or by calling 1-800-TAX-FORM (800-829-3676).

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