Municipal Bond Forum
Munis and the Affordable Care Act
Q
It’s my understanding that under the new tax rules, those in higher brackets may get hit twice on “tax-free” income. If modified adjusted gross income rises above $200,000 for a single filing taxpayer, a 3.8% surtax is imposed on all investment income, regardless of source.
A
James A. Klotz responds:
I’m afraid we differ on both counts.
According to our tax professionals, your tax-free income is not included in the calculation of the Affordable Care Act’s 3.80% surcharge.
Additionally, your tax-free income does not become taxable regardless of how substantial it may be, as long as you are filing by the conventional method, rather than the Alternative Minimum Tax (AMT) method.
Please consult your tax professional regarding your specific situation.
Start here.
Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.
The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.