New IRS rules on investment income tax

For investors, there’s no better time than now for taking capital gains.

That’s because the IRS has made it official: The 3.8% surtax on investment income, meant to pay for Obamacare, will go into effect in 2013.

The tax affects individuals with more than $200,000 in modified adjusted gross income and married couples filing jointly with more than $250,000 and applies to a broad range of investment securities ranging from stocks and bonds to commodity securities and specialized derivatives.

To show when the tax applies, the IRS gave an example of a taxpayer filing as a single individual who makes $180,000 in wage income plus $90,000 from investment income. The individual’s modified adjusted gross income is $270,000. The 3.8 percent tax applies to the $70,000, and the taxpayer would pay $2,660 in surtaxes, the IRS said.

The IRS released 159 pages of rules that explain when the tax will apply to trusts and annuities, as well as to individual securities traders. The IRS is also including information on a 0.9% healthcare tax on wages for those with high-income.

The agency also plans to release a new form for taxpayers to fill out for this tax when filing 2013 returns.

Does this impending surtax make you look more seriously at taking advantage of capital gains before the end of the year? Let us know your thoughts in the comments below.