What is the Net Investment Income Tax

Understanding the Net Investment Income Tax

It’s been around since 2013, but many are still struggling to come to grips with the net investment income tax. The 3.8% tax, which is sometimes referred to as the Medicare surtax on net investment income, affected approximately 3.1 million federal income tax returns for 2013 (the only year for which data is available) to the tune of almost $11.7 billion.1 Here’s what you need to know.

What is it?

The net investment income tax is a 3.8% “extra” tax that applies to certain investment income in addition to any other income tax due. Whether you’re subject to the tax depends on two general factors: the amount of your modified adjusted gross income for the year, and how much net investment income you have.

What income thresholds apply?

Modified adjusted gross income (MAGI) is basically adjusted gross income–the amount that shows up on line … Read More

When to start saving for Retirement

The Importance of Saving for Retirement at a Young Age

If you’re an adult in your 20s, you are entering an exciting stage of life. Whether you’ve just graduated from college or are starting a new career, you will encounter many opportunities and challenges as you create a life of your own.

As busy as you are, it’s no surprise that retirement may seem a long way off, especially if you’re just entering the workforce. What you may not realize, however, is that there are four very important advantages to begin planning and saving for retirement now.

1. Money management skills

Now that you’re out on your own, it’s important to start taking responsibility for your finances little by little. Part of developing financial responsibility is learning to balance future monetary needs with present expenses. Sometimes that means saving for a short-term goal (for example, buying a new car) and a … Read More

Mid-Life Financial Strategies:

Between age 45-55, employees are usually earning the most of any point in their lives. However, despite the feeling of monetary security, it is crucial to have solid mid-life financial strategies. Expenses such as children’s college bills and funding retirement can loom large on the horizon, and it is important to make the most of these wealth-building years.

One of the best things that you can do to ensure financial security is to organize and diversify your portfolio. It is important to have a variety of stocks, bonds, equities or other securities. These monies should vary in risk, time horizons and return on investment. You should also keep your portfolio fluid, retaining the ability to rebalance it if one investment becomes too heavily weighted.

Another significant consideration is taxes. At this moment, you are likely in the highest tax bracket you will ever be classified in. Because of this, you should … Read More