The purpose of the NIIT is to help fund the Affordable Care Act's health insurance subsidies. This article will discuss, "What Is The Net Investment Income Tax? How Does It Work?" Let's get started.
What Is The Net Investment Income Tax?
The net investment income tax (NIIT) is a 3.8% tax on the lesser of net investment income or the amount by which modified adjusted gross income (MAGI) exceeds the statutory threshold amount. The statutory threshold amounts are:
Married filing jointly: $250,000
Married filing separately: $125,000
Single or head of household: $200,000
Qualifying widow(er) with a child: $250,000
Net investment income includes, but is not limited to:
-Interest
-Dividends
-Capital gains
- Rental and royalty income
- Non-qualified annuities
Net investment income does not include:
-Wages
- Unemployment compensation
-Social Security benefits
- Alimony
- Most self-employment income
The NIIT was enacted in 2013 as part of the Affordable Care Act. The purpose of the NIIT is to help fund the Affordable Care Act's health insurance subsidies.
How Does It Work?
Here are some examples of how the NIIT works:
-A Married Couple Filing Jointly Has Magi of $ 300,000. They have $ 100,000 of network investment. They will owe NIIT $ 50,000 (The Lesser of their net investment income or the amount by which their magi exceeds the threshold amount).
- A single person has MAGI of $225,000. They have $75,000 of net investment income. They will not owe NIIT because their MAGI is below the threshold amount.
If you think you may be subject to the NIIT, you should consult with a tax professional.
What Is The Net Investment Income Tax? How Does It Work? - hopefully, this article can help you to get some knowledge.
