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.
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