What is the Net Investment Income Tax(NIIT)?
The net investment income tax, or NIIT, is an IRS tax related to the net investment income of certain individuals, estates and trusts. More specifically, this applies to the lesser of your net investment income or the amount by which your modified adjusted gross income (MAGI) surpasses the filing status-based thresholds the IRS imposes. The NIIT is set at 3.8%.
What is the Modified Adjusted Gross Income(MAGI)?
The MAGI is the sum of your adjusted gross income (AGI), your tax-exempt interest income, and specific deductions added back.
Threshold of the NIIT
| Filing Status | Threshold amount (MAGI) |
| Single | $200,000 |
| Married Filing Separately | $125,000 |
| Head of Household | $200,000 |
| Married Filing Jointly | $250,000 |
What items are included in Net Investment Income?
– Interest
– Capital gains
– Dividends
– Income from passive investment activities
– Non-qualified annuity distributions
– Rental and royalty income
How can I calculate the NIIT?
To calculate your NIIT, first you need to get your tax base: the lesser of (A) your net investment income or (B)the amount of your modified adjusted gross income (MAGI) above the threshold. Your tax amount is 3.8% of the tax base thus calculated.
Example
Mr. Jonson is a single person and earned$240K( $180K(wage) and $60K(dividend)).
His threshold amount is $200K, so the amount subject to the NIIT is $40K.
His NIIT is $1,520(3.8% of $40,000).
What is the Net Investment Income Tax(NIIT)?
The net investment income tax, or NIIT, is an IRS tax related to the net investment income of certain individuals, estates and trusts. More specifically, this applies to the lesser of your net investment income or the amount by which your modified adjusted gross income (MAGI) surpasses the filing status-based thresholds the IRS imposes. The NIIT is set at 3.8%.
What is the Modified Adjusted Gross Income(MAGI)?
The MAGI is the sum of your adjusted gross income (AGI), your tax-exempt interest income, and specific deductions added back.
Threshold of the NIIT
What items are included in Net Investment Income?
– Interest
– Capital gains
– Dividends
– Income from passive investment activities
– Non-qualified annuity distributions
– Rental and royalty income
How can I calculate the NIIT?
To calculate your NIIT, first you need to get your tax base: the lesser of (A) your net investment income or (B)the amount of your modified adjusted gross income (MAGI) above the threshold. Your tax amount is 3.8% of the tax base thus calculated.
Example
Mr. Jonson is a single person and earned$240K( $180K(wage) and $60K(dividend)).
His threshold amount is $200K, so the amount subject to the NIIT is $40K.
His NIIT is $1,520(3.8% of $40,000).