In 2010, President Obama signed into law the Health Care and Education Reconciliation Act of 2010 (the "Health Care Act"), which amended the Patient Protection and Affordable Care Act of 2010. The Health Care Act focuses on health care reform. To help finance health care reform, the Health Care Act imposes, through Section 1411 of the Internal Revenue Code, a new 3.8% Medicare tax on investment income (i.e., not wages or earned income) of individuals, trusts and estates.
Following the Supreme Court’s recent determination that the Health Care Act and its new taxes are constitutional, it’s time to focus on this new tax that will be imposed beginning in 2013. This Alert summarizes the provisions of, and potential planning for, the new 3.8% Medicare Tax (referred to herein as the "3.8% Tax").