Health-care Bill Surtax on Investment Income

One aspect of President Obama’s recently affirmed health care law about which most Americans are blissfully unaware, is a tax which will significantly impact the net investment income of many Americans. The surtax on investment income will effect most joint filers with adjusted gross income of more than $250,000 ($200,000 for single filers).

Starting on January 1, 2013, the tax rates on long-term capital gains and dividends for these earners could jump 3.8%, from their current historic low of 15% to 18.8%, assuming Congress extends the current tax rates (As of July 2, 2012, there is not yet any IRS guidance on this new law)

As a result, savvy investors will be looking to shelter more of their assets in tax-deferred or tax-free retirement accounts in order to minimize the impact of this new investment tax. Using a self directed IRA or self-directed Roth IRA is extremely attractive tax planning option in an accelerated tax environment. Because withdrawals are tax-free, the self-directed Roth IRA usually offers the best protection against the new investment tax.