What constitutes Net Investment Income?
Examples of investment income that is subject to the NIIT include dividends, interest, passive income, annuities, royalties and capital gains , non-qualified annuities, income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer (within the meaning of section 469). IRC allows certain expense to be reduced while computing the Net Investment Income.
What is the Net Investment Income Tax Rate ?
Net Investment Income Tax (NIIT) is a 3.8% (both for tax year 2018 & 2019 ) of Medicare tax that applies to investment income and to regular income over a certain threshold. If your Modified Adjusted Gross Income exceeds $200,000 (or $250,000 if you’re married and filing jointly) you may be subject to the NIIT.
That 3.8% tax will be applied to the least of
- Either your net investment income or
- the amount by which your MAGI exceeds the threshold limit as given below .
Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following net investment income tax threshold:
|Married filing jointly|
|Married filing separately|
|Head of household (with qualifying person)|
|Qualifying widow(er) with dependent child|
Taxpayers should be aware that these threshold amounts are not indexed for inflation.
You can report your net investment income in form IRS Form 8690.
Net Investment Income Tax Calculator
This will answer your question ” how to calculate net investment income tax?” , Just input the fields and you get the net investment income tax along with any additional Medicare tax if you are a salaried person.