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Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

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Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

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Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

  • Writer's pictureAndrew Young
    • Aug 17, 2023
    • 2 min read

The High Earners Tax - Net Investment Income Tax

One tax most are not familiar with is the Net Investment Income Tax or NIIT. This is also sometimes referred to as the Obamacare surcharge as a tax created in the same legislation as the Health Care and Education Reconciliation Act of 2010, with NIIT taking effect in 2013.

This is a 3.8% tax on high earners—specifically, those whose modified adjusted gross income or MAGI meets the tax threshold above $200,000 for a filing status of single and head of household, $250,000 for married filing joint and qualifying widower, and $125,000 for married filing separately. Earning these incomes would put your income in the top 10% in the United States for 2022. Please note that MAGI is not on your federal 1040 tax return form, but AGI can be found on line 11 of the 1040.


These minimum income levels have been at the same level since the laws passed, meaning there’s no inflation index for these numbers, which most tax limits have. Because of this, it’s starting to apply to more and more people as wages have increased more than usual in the last several years.


What is subject to the net investment income tax?

· Interest

· Dividends (Qualified or Non-Qualified)

· Sale of assets (rental homes, stocks, or any other security), whether they are subject to short or long-term capital gains rates

· Rental / Royalty income

· Non-Qualified Annuity distributions

· Income from passive income activities


What is not subject to the net investment income tax?

· Wages

· Social Security or Veteran’s Benefits

· Pensions

· Tax-Exempt Interest (Municipal Bonds)

· Qualified Retirement Distributions (IRA, 401(k))

· Tax-Exempt Income from the sale of your primary home

· Life insurance proceeds

· Operating Income from non-passive businesses


There are several ways to reduce your taxable income to avoid this tax by using certain financial accounts: Traditional 401(k) / 403(b), SEP / Simple IRA, Health Savings Accounts (HSAs), Flexible Spending Accounts (FSA), and Dependent Care Savings Accounts (DCSA). The items subject to NIIT stack on top of your ordinary income or those not subject to the tax.


Let’s look at an example:

Mary and Paul have an adjusted gross income (AGI) of $180,000 in 2022. They owned a rental real estate property that they sold that netted a $100,000 long-term capital gain in 2022. They had $2,000 earned in their High Yield Savings Account. They had dividends of $3,000. Their total AGI added up to $285,000 for the year. $35,000 is above the $250,000 NIIT threshold and thus subject to NIIT, which would result in an additional $1,330 owed in federal income taxes.


As you can see in this example, taxes can greatly impact your financial plan and goals. That is why at Whitaker-Myers Wealth Managers, we have a CPA on our team so that we are equipped to help you in all areas of your finances. If you have any questions on how this tax may apply, please contact me, Andrew Young, or Kage Rush, CPA.

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Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

​

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

​

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

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