Net Investment Income Tax
The most frequently asked tax questions related to Net Investment Income Tax
For Tax Payers
Need professional help with a specific tax issue or have general tax questions? Ask a CPA is the easiest way to get advice from a licensed accountant in our network.
Ask a Tax QuestionFor Accountants
Provide answers to tax questions and introduce your practice to new potential clients. Build your CPAdirectory profile and earn reputation points.
Answer Tax QuestionsWhat is the Net Investment Income Tax ?
Asked Wednesday, August 21, 2013 by an anonymous user
The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code (IRC). The NIIT applies at a rate of 3.8 percent to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.
When did the Net Investment Income Tax take effect ?
Asked Wednesday, August 21, 2013 by an anonymous user
The Net Investment Income Tax went into effect on Jan. 1, 2013. The NIIT affects income tax returns of individuals, estates and trusts for their first tax year beginning on (or after) Jan. 1, 2013. It does not affect income tax returns for the 2012 taxable year filed in 2013.
When did the Net Investment Income Tax take effect ?
Asked Wednesday, August 21, 2013 by an anonymous user
The Net Investment Income Tax went into effect on Jan. 1, 2013. The NIIT affects income tax returns of individuals, estates and trusts for their first tax year beginning on (or after) Jan. 1, 2013.
It does not affect income tax returns for the 2012 taxable year filed in 2013.
It does not affect income tax returns for the 2012 taxable year filed in 2013.
What individuals are subject to the Net Investment Income Tax ?
Asked Wednesday, August 21, 2013 by an anonymous user
Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:
Married Filing jointly & Qualifying widow(er) $250,000
Single or Head of Household $200,000
Married filing separately $125,000
Married Filing jointly & Qualifying widow(er) $250,000
Single or Head of Household $200,000
Married filing separately $125,000
What is included in Net Investment Income?
Asked Wednesday, August 21, 2013 by an anonymous user
In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities, and businesses that are passive activities to the taxpayer.
To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income
To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income
What kinds of gains are included in Net Investment Income?
Asked Wednesday, August 21, 2013 by an anonymous user
To the extent that gains are not otherwise offset by capital losses, the following gains are common examples of items taken into account in computing Net Investment Income:
1.Gains from the sale of stocks, bonds, and mutual funds.
2.Capital gain distributions from mutual funds.
3.Gain from the sale of investment real estate (including gain from the sale of a second home that is not a primary residence).
Gains from the sale of interests in partnerships and S corporations (to the extent you were a passive owner).
1.Gains from the sale of stocks, bonds, and mutual funds.
2.Capital gain distributions from mutual funds.
3.Gain from the sale of investment real estate (including gain from the sale of a second home that is not a primary residence).
Gains from the sale of interests in partnerships and S corporations (to the extent you were a passive owner).
Does this tax apply to gain on the sale of a personal residence?
Asked Wednesday, August 21, 2013 by an anonymous user
The Net Investment Income Tax will not apply to any amount of gain that is excluded from gross income for regular income tax purposes.
The pre-existing statutory exclusion in IRC section 121 exempts the first $250,000 ($500,000 in the case of a married couple) of gain recognized on the sale of a principal residence from gross income for regular income tax purposes and, thus, from the NIIT.
The pre-existing statutory exclusion in IRC section 121 exempts the first $250,000 ($500,000 in the case of a married couple) of gain recognized on the sale of a principal residence from gross income for regular income tax purposes and, thus, from the NIIT.
What investment expenses are deductible in computing Net Investment Income?
Asked Wednesday, August 21, 2013 by an anonymous user
In order to arrive at Net Investment Income, Gross Investment Income is reduced by deductions that are properly allocable to items of Gross Investment Income.
Examples of properly allocable deductions include investment interest expense, investment advisory and brokerage fees, expenses related to rental and royalty income, and state and local income taxes properly allocable to items included in Net Investment Income.
Examples of properly allocable deductions include investment interest expense, investment advisory and brokerage fees, expenses related to rental and royalty income, and state and local income taxes properly allocable to items included in Net Investment Income.
How will I report and pay the Net Investment Income Tax?
Asked Wednesday, August 21, 2013 by an anonymous user
For individuals, the tax will be reported on, and paid with Form 8960 and on Form 1040.
For Estates and Trusts, the tax will be reported on, and paid with, the Form 1041.
For Estates and Trusts, the tax will be reported on, and paid with, the Form 1041.