Mr. and Mrs. Bolt's joint return reports $267,500 AGI, which includes $13,300 net investment income. Compute the couple's unearned income Medicare contribution tax.

Question

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The unearned income Medicare contribution tax is calculated as 3.8% of the lesser of the couple's net investment income ($13,300) or the amount their AGI exceeds the applicable threshold ($250,000 for married filing jointly in 2021).

$267,500 AGI - $250,000 threshold = $17,500 excess AGI
3.8% x $13,300 net investment income = $505
Since the excess AGI ($17,500) is greater than the net investment income ($13,300), we use the net investment income to calculate the tax. Therefore, the couple owes $505 in unearned income Medicare contribution tax.

Mr and Mrs