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Basics of the Net Investment Income Tax
Section 1411

1. What is the Net Investment Income Tax (NIIT)?

The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.

2. When did the Net Investment Income Tax take effect?

The Net Investment Income Tax went into effect on Jan. 1, 2013. The NIIT affects income tax returns of individuals, estates and trusts, beginning with their first tax year beginning on (or after) Jan. 1, 2013. It does not affect income tax returns for the 2012 taxable year filed in 2013.

Who Owes the Net Investment Income Tax
 

3. What individuals are subject to the Net Investment Income Tax?

Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:

Filing Status

Threshold Amount

Married filing jointly

$250,000

Married filing separately

$125,000

Single

$200,000

Head of household (with qualifying person)

$200,000

Qualifying widow(er) with dependent child

$250,000

Taxpayers should be aware that these threshold amounts are not indexed for inflation.

If you are an individual who is exempt from Medicare taxes, you still may be subject to the Net Investment Income Tax if you have Net Investment Income and also have modified adjusted gross income over the applicable thresholds.

Disclaimer: The above brief descriptions are not to be construed as legal or tax advice. In case of any discrepancy, the actual closing documents could control.1031FEC recommends investors considering an IRS IRC 1031 tax-deferred exchange transaction, an IRS IRC 721 exchange or other property replacement for tax relief include and consult their accountant and/or attorney.

Contact 1031FEC for more information.

IRS NIIT Information https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax

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