Start with the 3.8% Medicare Surtax. It applied to unearned income of single filers with modified adjusted gross income above $200,000 and of couples over $250,000. Marrieds filing separately get a $125,000 threshold. Modified AGI is AGI plus any tax free foreign earned income. The surtax is levied on the on the smaller of the filer’s net investment income or the excess of modified AGI over the thresholds. Investment income includes interest, dividends, payments of substitute interest and dividends by brokers, capital gains, annuities, royalties and passive rental income. Tax free interest is exempted, along with payouts from retirement plans such as 401(k)s, IRAs, deferred-pay plans and pension plans.