Additional Net Investment Income Tax for High Income Taxpayers

Income Tax Service

Terry Hough

May 16, 2013 Newsletter

Additional Net Investment Income Tax for High Income Taxpayers

Beginning in 2013, a new 3.8% additional tax on net investment income applies when a taxpayer's modified adjusted gross income exceeds the following thresholds:

$250,000 for Married Filing Joint or Qualifying Widow(er) filers
$125,000 for Married Filing Separate filers
$200,000 for Single or Head of Household filers

Modified adjusted gross income is defined as the taxpayer's adjusted gross income increased by the net amount of exempt foreign sourced income.

Investment income generally includes:

interest,
dividends,
capital gains,
rental or royalty income,
nonqualified annuities,
income from businesses involved in trading financial instruments or commodities, and
passive activity business income.

Net investment income is the total investment income reduced by any expenses that are properly allocable to the investment income.

Individuals that are subject to this tax will calculate the tax on a new IRS form. Any net investment income tax that a taxpayer owes will then flow to the Other Taxes section of Form 1040.

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