What is the Net Investment Income Tax (NIIT)?

In addition to capital gains taxes, if an individual’s income exceeds a certain threshold they will also be subject to a Net Investment Income (NIIT). 

NIIT is an additional 3.8% tax on certain net investment income of individuals and certain trusts or estates who meet a Modified Adjusted Gross Income (MAGI) threshold.

The tax was imposed under Section 1411 back on January 1, 2013. The trust or estate may qualify if they have undistributed net investment income and adjusted gross income over $12,150. Generally, net investment income includes interest, dividends, capital gains, rental and royalty income, and non-qualified annuities. It does not include gains on the sale of a personal residence. Below are the MAGI thresholds.

If you believe you owe NIIT you will need to fill out Form 8960 on your taxes.

The Net Investment Income Tax is applied for taxpayers above the following Modified Adjusted Gross Income levels:

  • 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

More on calculating your QSBS exclusion

This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.

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