Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

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65-Day Rule and New 3.8% Medicare Tax

For Trusts (and Estates) that report income on a calendar year, distributions can be made to beneficiaries up to 65 days after the end of the calendar year, or March 6, 2014, that carry out taxable income from 2013.  New for 2013 is the 3.8% Medicare Tax on Net Investment Income over a threshold amount.  For trusts and estates the threshold is $11,950.  For single individuals, the threshold is $200,000 and for married filing jointly, the threshold is $250,000.  Because of the relatively low threshold for estates and trusts for the imposition of this added tax on net investment income (defined as not earnings/wages and not income from an active trade or business, but will include interest, dividends and passive rent), a trustee or personal representative should carefully consider whether to make distributions of taxable income from the trust or estate to the beneficiaries so that they report it on their personal returns, and are subject to the higher individual thresholds.

 

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