Net Investment Income Tax
The Net Investment Income Tax, also known as the Medicare Contribution Tax, is a 3.8% tax on net investment income of individuals, estates, and trusts further detailed in Code Section 1411 of the Internal Revenue Code. Taxpayers subject to the 3.8% surtax must pay this tax in addition to the Medicare tax on earned income. Individuals who are nonresident aliens, dual-resident, or dual status are not subject to the Net Investment Income Tax.
Origin
The Net Investment income Tax was enacted under the Health Care and Education Reconciliation Act of 2010 (Pub.L. 111–152, 124 Stat. 1029), which added Sec. 1411 to chapter 2A of the Internal Revenue Code. The Net Investment Income Tax took effect on January 1st, 2013. The …show more content…
1411(a)(1), the Net Investment Income tax is 3.8% of the lesser of the taxpayer’s net investment income (A), or the difference between the taxpayer’s MAGI and the relative threshold amount (B). If a taxpayer’s MAGI is below the threshold amount, he or she is not subject to the 3.8% Net Investment Income Tax. Taxpayers calculate MAGI by adding any foreign earned income to adjusted gross income for the taxable year.
According to Section 1411(c)(1)(A), Net Investment Income is the excess of investment income over any deductions allocable to investment income. Investment income includes income from interest, dividends, annuities, royalties, rents, passive activities, and gains attributable to non-business property. Interest expenses deductible in computing Net Investment income include: investment interest expenses, advisory and brokerage fees, expenses associated with rental and royalty income, fiduciary expenses, and state, local, and foreign income tax.
According to Sec. 1411(a)(2), estates and trusts are subject to the 3.8% on the lesser of the undistributed Net Investment Income (A), or the difference between adjusted gross income and the dollar amount at which the highest estate and trust income tax bracket begins
The Net Investment Income Tax, also known as the Medicare Contribution Tax, is a 3.8% tax on net investment income of individuals, estates, and trusts further detailed in Code Section 1411 of the Internal Revenue Code. Taxpayers subject to the 3.8% surtax must pay this tax in addition to the Medicare tax on earned income. Individuals who are nonresident aliens, dual-resident, or dual status are not subject to the Net Investment Income Tax.
Origin
The Net Investment income Tax was enacted under the Health Care and Education Reconciliation Act of 2010 (Pub.L. 111–152, 124 Stat. 1029), which added Sec. 1411 to chapter 2A of the Internal Revenue Code. The Net Investment Income Tax took effect on January 1st, 2013. The …show more content…
1411(a)(1), the Net Investment Income tax is 3.8% of the lesser of the taxpayer’s net investment income (A), or the difference between the taxpayer’s MAGI and the relative threshold amount (B). If a taxpayer’s MAGI is below the threshold amount, he or she is not subject to the 3.8% Net Investment Income Tax. Taxpayers calculate MAGI by adding any foreign earned income to adjusted gross income for the taxable year.
According to Section 1411(c)(1)(A), Net Investment Income is the excess of investment income over any deductions allocable to investment income. Investment income includes income from interest, dividends, annuities, royalties, rents, passive activities, and gains attributable to non-business property. Interest expenses deductible in computing Net Investment income include: investment interest expenses, advisory and brokerage fees, expenses associated with rental and royalty income, fiduciary expenses, and state, local, and foreign income tax.
According to Sec. 1411(a)(2), estates and trusts are subject to the 3.8% on the lesser of the undistributed Net Investment Income (A), or the difference between adjusted gross income and the dollar amount at which the highest estate and trust income tax bracket begins