The additional 3.8% Medicare contribution tax on investment income is for taxpayers whose adjusted gross income (AGI) exceeds $200,000 (or $250,000 if married filing jointly). Investment income is defined as interest, dividends, annuities, royalties, rents, passive business income, and gains from dispositions of property (other than property used in a trade or business, excluding passive businesses).
What does this mean if you sell your main home?
If you sell your main home, the $250,000 (or $500,000 if married filing jointly) capital gain exclusion still applies. However, if you have a net gain to report on Schedule D Capital Gains and Losses, and your AGI exceeds $200,000 (or $250,000 if married filing jointly), then you may be assessed a 3.8% Medicare contribution tax in addition to the income tax calculated on Form 1040 U.S. Individual Income Tax Return .
The assessment of this tax is outlined in detail in Chapter 2A - Unearned Income Medicare Contribution of the Health Care and Education Reconciliation Act of 2010.
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