What is the Obamacare Surtax (And Should You Worry About It)?

David explains how Obamacare surtax, which was introduced back in 2013 when Obamacare passed, works and who it affects.

The 3.8% of Obamacare surtax only applies to the investment income that reaches above and beyond specific thresholds: $200,000 for an individual person and $250,000 for a married couple filing jointly. 

David addresses the question of how this could affect you if you’re planning on doing a Roth conversion at some point in the next 10 years.

According to David, not many people pay the Obamacare surtax and he reminds us that any distributions from Roth IRA, from Roth 401k, from Roth conversions or loans from cash value, and LIRPs don’t count towards that $200,000 or $250,000 threshold the Obamacare surtax applies to.

David considers the Obamacare surtax a pesky little tax that will affect the top 1% of Americans fairly consistently and middle-income America only occasionally, particularly in the years where they have only a one-time windfall event.

David cautions against postponing the payment of a capital gain tax or a Roth conversion to some point much further down the road to avoid paying this 3.8% Obamacare surtax because you may end up being surprised with a much higher tax on your ordinary income or on your capital gains. 

Mentioned in this episode:

David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code


PowerOfZero.com (free video series)

@mcknightandco on Twitter 

@davidcmcknight on Instagram

David McKnight on YouTube

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