Ugh taxes. Nobody wants to think about them let alone talk about them. As business owners with growing incomes (and growing quickly for some), that’s not an option. We have to know or the taxes will eat-your-profits-for-lunch. We had a tax issue this year that was the source of unbelievable stress. Something I don’t wish to repeat. Ever.
Moving along, I was going through my feeds this morning and the issue of a 3.8% surtax thing caught my eye. Apparently, as part of the Affordable Care Act, there’s a new surtax for unearned investment income. Typically, this applies to investments in the form of capital gains and dividends, but what most don’t know is it also applies to business income. According to the author, here’s how…
When you aren’t “materially participating” in your business, but you are still receiving income from the business, it is considered unearned income, and it is subject to the tax.
He also gives you some information how to reduce the surtax and who else needs to pay attention to this. Worth taking a read to save you from leaking your hard earned money.