San Francisco Estate, Business, and Investor Immigration Law Blog
Obamacare's 3.8% surtax on investment income applies to individuals making more than $200,000 adjusted annual income.
With top capital gains tax rates having recently increased from 15% to 20% for individuals with incomes of more $400,000 per year, investors may now be facing a 23.8% tax on net investment income.
This is a fifty-eight percent increase from 2012 tax rates.
A Charitable Remainder Trust may useful in minimizing the impact of this surtax using property that has appreciated.
- Once the property has been transferred to the trust, it is sold and the proceeds paid out in annual payments of at least 5% of the trust's initial value.
- The value of the trust at the Trustor's death then goes to the selected charity.
- The tax advantage is that the trust can sell the appreciated property without incurring the 3.8% Obamacare tax. The beneficiaries are still subject to capital gains owed, but the smaller payments taxed will be spread over a longer period of time.