SURPRISE!!. YOU MAY BE SUBJECT TO THE NEW 3.8% NET INVESTMENT INCOME TAX

Roth Solo 401k

The Patient Protection and Affordable Care Act (PPACA) added 3.8% Net Investment Income Tax to the Internal Revenue Code. The tax applies to net investment income of individuals with income higher than the below listed threshold amounts.

The final regulations generally apply to tax years beginning after December 31, 2013 to Individuals if they have net investment income and their modified adjusted gross income exceeds the thresholds:

Filing status	Threshold amount
Married filing jointly with dependent child	$250,000
Married filing separately	$125,000
Single/head of household	$200,000

For individuals whose modified adjusted gross income exceeds the thresholds, the Net Investment Income Tax applies to the lesser of:

1.    The amount by which modified adjusted gross income exceeds the threshold in the table above

or

2.    The amount of net investment income

Net investment income is generally the sum of the income items below, reduced by expenses allocable to the income:

1.  Gross income from interest, dividends, royalties and rents, except to the extent such income is excluded under the ordinary course of a trade or business exception

 
2.    Passive income from some trades or businesses, including those trading financial instruments or commodities
 
3.    Net capital gains attributable to the disposition of property.
 

   
The Roth Solo 401k plan can provide the exemptions from the tax as:

the following are not subject to the Net Investment Income Tax:

·         Dividends on employer stock distributed to participants under Section 404(k)

·         Amounts treated as distributed for tax purposes, such as a Roth IRA conversion

·         Rollovers to an IRA or another qualified plan

·         Corrective distributions from a qualified plan or arrangement necessary to maintain its tax-favored status

·         Net unrealized appreciation attributable to employer securities that is realized on the later sale of the employer securities

·         Amounts taxed as wages

Roth Solo 401k distributions are not includable in income so they will not increase modified adjusted gross income.

Check with your Accountant or CPA and avoid the Surprise!!

Solo 401k Plan: Your Opportunity for Checkbook Control of Your Future

(Information provided as an informational service and not to be construed as tax or legal advice)