Calculating Net Investment Income Tax
The Net Investment Income Tax (NIIT) went into effect on January 1, 2013 and applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts. The tax is imposed on individuals with Net Investment Income and Modified Adjusted Gross Income (MAGI) over the following thresholds:
|
Filing Status |
Threshold Amount |
|
Married filing jointly |
$250,000 |
|
Married filing separately |
$125,000 |
|
Single |
$200,000 |
|
Head of household (with qualifying person) |
$200,000 |
|
Qualifying widow(er) with dependent child |
$250,000 |
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.
Individuals, estates, and trusts will use Form 8960 and instructions to compute their Net Investment Income Tax.
For individuals, the tax will be reported on the Form 1040. For estates and trusts, the tax will be reported on the Form 1041.
In conclusion, the NIIT of 3.8% appears in the Tax Clarity software on the Tax Map as an additional 3.8% added to a standard tax threshold. Example 24% + 3.8% = 27.8%
In the Details section NIIT appears underneath the MAGI.
