​How to Determine if the Net Investment Income Tax Applies to You

Published: 2/26/2015 9:59:43 AM

How to Determine if the Net Investment Income Tax Applies to You

If you have income from investments, you may be subject to the Net Investment Income Tax. You may owe this tax if you receive investment income and your income for the year is more than certain limits. Here are some key tips you should know about this tax:

Net Investment Income Tax. The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

You may owe this tax if your modified adjusted gross income is more than the following amount for your filing status:

Filing Status

Threshold Amount

Single or Head of household

$200,000

Married filing jointly

$250,000

Married filing separately

$125,000

Qualifying widow(er) with a child

$250,000

Net investment income generally includes:

Interest,

Dividends,

Capital gains,

Rental and royalty income, and

Non-qualified annuities.

Of course there is more to it and this list is not all-inclusive.

Net investment income generally does not include wages and most self-employment income nor does it include unemployment compensation, Social Security benefits or alimony. Also it also does not include any gain from the sale of your main home that you exclude from your income.

Refer to Form 8960, Net Investment Income Tax, to see if this tax applies to you. You can check the form's instructions for the details on how to figure the tax.