Wondering What Healthcare Legislation Will Cost You?
December 17, 2010 by
I recently attended a seminar and spent a lot of time reviewing the tax effects of the Patient Protection and Affordability Act of 2010, the new health care legislation. As the law is currently written, come 2013 and beyond the intention is to levy a new 3.8% tax on the “net investment income” of individuals earning more than $200,000 a year and couples filing jointly earning more than $250,000 a year. Net investment income is generally interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business) This is of course really bad news if you fall into this category. What I realized is that this is another very good reason to make a Roth conversion. Why? Looking down the road, if you start taking money from your regular IRA what will happen? That’s right, your taxable income will go up because every dollar you take from a regular IRA is taxable at ordinary rates. So, if that happens in 2013 and beyond it may push you into the “high income” camp and subject you to the additional 3.8% tax! A Roth conversion may help you avoid this?