If a penny saved is a penny earned, what is a dollar invested?

Taxed, if the taxpayer falls under the new Medicare tax on investment income scheduled to take effect in 2013.

Under § 1411 of the Internal Revenue Code, a new tax of 3.8% is imposed on net investment income of certain individuals, trusts, and estates.

For individuals, the tax is assessed on either net investment income or the excess of modified adjusted gross income (MAGI) over the threshold amount, whichever is less. For a married couple filing jointly, the threshold amount is $250,000; for a married person filing a separate return, the threshold amount is $125,000; for everyone else, the threshold amount is $200,000.

The new tax only applies to an individual if his or her income exceeds the threshold amount, as explained in the following examples.

EXAMPLE A

• A single taxpayer in 2013 with a MAGI of $150,000 and net investment income of $60,000 will not be subject to the new tax because the MAGI is under the threshold amount.

EXAMPLE B

• A married couple filing a joint return in 2013 with a MAGI of $375,000 and net investment income of $100,000 would be taxed on $100,000 because the net investment income is less than $125,000 (the excess of the MAGI over the threshold).

While the tax should not apply to tax-exempt bond interest, it could apply to gain from the sale of a principal residence if the gain exceeds the amount of the deduction allowed under §121 ($250,000 for individuals or $500,000 for married couples filing jointly) or if the gain is from the sale of a vacation home.

The 3.8% tax is also imposed on certain income of trusts and estates.

As one might have guessed, there are additional applications and exemptions, as well as some important statutory definitions (net investment income, MAGI, and AGI for starters). The bottom line is that overhauling healthcare is expensive ($115 billion more expensive than originally thought, according to the Congressional Budget Office) and someone has to pay for it.