Subject to new tax surcharge?
Victory State Bank sees investment-income levy spawning strategies
STATEN ISLAND, N.Y. -- The impact of the new federal 3.8 percent surtax on net investment income is already shaping approaches to 2014 returns.
Victory State Bank says the increasing volume of buzz about the new tax indicates a large number of people are in its crosshairs.
Single taxpayers with a modified adjusted gross income (MAGI) above $200,000 are subject to it, as are couples above $250,000.
The Net Investment Income Tax (NIIT) has shown itself to be somewhat complicated in taking a bite from interest, dividends, capital gains, rental receipts, royalties, and more.
Forbes magazine tells readers, "The NIIT is still practically brand-new, and the final regulations are complex."
At the end of a piece outlining some ways to reduce or avoid the surcharge, some of which Forbes suggests may not be practical, the magazine says, "Pay a tax pro before trying any fancy stuff."
In fact,the American Institute of CPAs has issued advisory information for practitioners toward minimizing the impact on individuals' passive investment income and on estates and trusts.
The levy was widely described as a way to help pay for the The Patient Protection and Affordable Care Act, popularly called Obamacare.
The surcharge's reach is rather sweeping, and other sources are distilling the basics into short lists that include these highlights:
- Gains from selling stocks and securities in taxable brokerage accounts; capital gains from mutual funds; real estate gains that include the taxable portion of a large gain from the sale of a principal residence.
- Gross income from (a) dividends, (b) interest but excluding tax-free interest such as from municipal bonds, (c) royalties, (d) annuities, (e) gains from passive business activities requiring minimal time spent on them, and (f) rents.
- Gains from the sale of passive partnership interests and S corporation stock which take up very little time.
- Gross income and gains from trading financial instruments or commodities.
For someone considering a tax-trimming conversion to a Roth, a caveat from Kiplinger's advises keeping income below amounts that trigger the tax and being mindful of the 3.8 percent if there's a likelihood of crossing into a higher bracket.
About Victory State Bank
VSB Bancorp, Inc. (OTCQB: VSBN) is the one-bank holding company for Victory State Bank. As Staten Island, N.Y.’s only community-based commercial bank, Victory State Bank operates five full-service locations on the Island: The main office in the community of Great Kills, and branches in the communities of West Brighton, St. George, Dongan Hills and Rosebank. For additional information, Victory State Bank may be reached at 718-979-1100 or visited online http://www.victorystatebank.com.