The law as it stands now is clear. And there not much of any indication
that Congress is about to change it, except possibly to increase the
rate substantially in view of the deficits projected by the CBO:
"Medicare Tax and the Unearned Income Medicare Contribution Tax
2.9% Medicare tax will be expanded to 3.8% for some taxpayers starting 2013
By William Perez, About.com Guide Updated June 29, 2010
The United States government imposes a Medicare tax of 2.9% on wages
received by an employee and on business or farming income earned by
self-employed individuals. Starting in the year 2013, Medicare taxes
will be increased to 3.8% and expanded to cover both wage income and
investment income for higher-income individuals. Medicare taxes are
imposed at a flat tax rate of 2.9% on wages, salaries, and business or
farming income earned by self-employed individuals. There's no limit on
the amount wages subject to Medicare taxes, unlike the annual wage limit
for Social Security taxes.
The medicare hospital insurance tax is paid half by employees through
payroll deductions and half by the employer. Accordingly, employees pay
a Medicare tax rate of 1.45% (half of the 2.9% rate). Self-employed
persons pay both halves of the Medicare tax since they are both the
employee and the employer. However, self-employed persons are allowed to
deduct half of the Medicare tax as an adjustment to income.
Self-employed persons calculate and pay their Medicare tax when filing
their personal tax return as part of the self-employment tax.
Starting in the year 2013, the Medicare tax will be expanded. The tax
rate will be increased for higher-income individuals, and the income
subject to the Medicare tax will be expanded to include investment
income. Technically, this additional tax is called the unearned income
Medicare contribution tax, and was enacted as part of the health care
reform laws.
The unearned income Medicare contribution tax is an additional tax of
3.8%. This tax is in addition to any regular income taxes. The tax is
calculated by multiplying the 3.8% tax rate by the lower of the
following two amounts: net investment income for the year; or modified
adjusted gross income over a certain threshold amount.
--
http://taxes.about.com/od/payroll/a/Medicare-Tax.htm
On 9/23/2012 3:41 PM, Queen of Comps wrote:
>
>
http://www.taxabletalk.com/2010/03/18/unearned-income-tax-in-new-healthcare-bill-will-impact-gambling/
>
> Marissa, my co-author of Tax Help for Gamblers and an enrolled agent,
> says that the above explanation is "wrong for now." We need to wait
> until the final regulations come out in December. She answered this
> question on Twitter. (@taxpro4gamblers) You may ask other tax
> questions there.
>
> ------------------------------------------
> Jean $¢ott, Frugal Gambler
>
http://queenofcomps.com/
> You can read my blog at
>
http://jscott.lvablog.com/
>
> -----Original Message-----
> From: mailto:
vpFREE%40yahoogroups.com
> [mailto:
mailto:vpFREE%
40yahoogroups.com] On Behalf Of
> sulbimenfg311
> Sent: Monday, September 17, 2012 9:46 PM
> To: mailto:
vpFREE%40yahoogroups.com
> Subject: [vpFREE] New unearned income tax
>
> In 2013 a 3.8% unearned income tax goes into effect for taxpayers with
> MAGI
> over $200,000 if single and $250,000 if married. Gambling income BEFORE
> deductions for losses counts as unearned income. As someone who plays
> mostly
> $10 machines I guess I'll have to move way down in stakes, file as a
> pro, or
> give up VP. Since a large percentage of my income comes from other
> sources,
> not sure filing as a pro is an option. Just wondering how everyone who
> plays
> stakes high enough to be impacted by the new law is planning on handling
> this..
>
> Taken from
>
http://www.taxabletalk.com/2010/03/18/unearned-income-tax-in-new-healthcare-
> bill-will-impact-gambling/
>
> "The new healthcare legislation contains plenty of taxes. One
> especially bad
> one is a new 3.8% tax on unearned income above $200,000. This will have a
> very bad impact on amateur gamblers.
>
> When I last looked at the bill, the tax was 2.9%. In the "final"
> version of
> the bill, it's up to 3.8%. Let's take a hypothetical gambler, Joe Student.
> Mr. Student has $500,000 of winning sessions and $495,000 of losing
> sessions. After his standard deduction and exemption he owes no tax.
>
> But not in the near future. He'll owe 3.8% on $300,000 of mostly phantom
> income, or $11,400. What will Joe Student do? He'll cheat on his taxes, of
> course. Pay $6,400 more than what he made on his income-you must be
> kidding!
> But that's exactly what the legislation dictates."
>
> ------------------------------------
> From: Cogno Scienti
> Sent: Monday, September 17, 2012 10:21 PM
> To:
vpFREE@yahoogroups.com <mailto:
vpFREE%40yahoogroups.com>
> Subject: RE: [vpFREE] New unearned income tax
> I've been following this since it started. While we won't know for sure
> until the IRS actually spells it out, all of the articles I've read other
> than the one you quoted from Russ Fox say that the tax is only on net
> investment income, which probably does not include gambling winnings.
> However, in the same way that boosting your AGI already costs you more in
> phased-out deductions, it will also mean that the 3.8% tax will apply to
> more or all of your investment income.
>
> Filing as a pro may actually cost you more if you don't have huge
> investment
> income, since there is self-employment tax and an increased Medicare tax.
>
> I'm watching this closely in case Russ is right and gambling winnings are
> subject to the 3.8% tax, but so far all the other authorities I've read
> don't mention gambling winnings.
>
> Cogno
>
------------------------------------
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