MDNews - Minnesota

for the Tax-Time Headache By Bill Strand, Founder and Principal of Paradigm: Strategies in Wealth Management S INCE MOST OF us just finished filing our annual tax returns last month, this might seem like a strange time to start thinking about taxes again. Most of us would just like to forget the entire tax-filing experience and hope that it goes away forever. Since taxes are getting increasingly complex and expensive, especially for high-income taxpayers, it's wise to begin planning for taxes right now, while the pain is still fresh in our minds. And while there is still no cure for the headaches that accompany tax filing, a well-informed taxpayer can at least find some relief along the way. In 2013, many of you saw firsthand that Congress had given us several new taxes to help pay for the ACA. Congress passed the law in 2010, but it didn't take effect until Jan. 1, 2013. In addition to the increase in the top tax brackets, there was also a maddeningly complicated extra 3.8 percent levy on certain invest- ment income called the Net Investment Income Tax (NIIT). The NIIT is the topic of my article this month. After a brief summary of the NIIT rules, I'll give you a couple of real-world examples that should help clarify things. NIIT Summary While the new tax brackets apply only to tax- able income over $406,750 for a single taxpayer or $457,600 for a couple, the NIIT drops way down the income ladder and applies to those with Modified Adjusted Gross Income (MAGI) above $200,000 for a single filer or $250,000 for a couple. For most taxpayers, MAGI will be the same as your AGI or Adjusted Gross Income. Your AGI can be found on the bottom of tax Form 1040, Line #37. The NIIT rules state that you will pay an additional 3.8 percent tax on the lesser of either the difference between your MAGI and the MAGI threshold level or your net investment income. Most physicians are either already above the MAGI threshold or very likely will be at some point in their careers, especially considering that the NIIT is not indexed for inflation. This means the NIIT has Still No Cure +++++++++++++++++++++++++++++ + +++ + +++ +++++++++++++++++++++++++++++ WEALTH MANAGEMENT ❯ By Bill Strand, Founder 1 0 | Minnesota MD NEWS ■ M D N E W S . CO M

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