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Net Investment Income Tax, Do I Need to File? A Quick Overview

When filing your income tax returns with the IRS, you may need to file a form 8960 if you owe Net Investment Income Tax. This tax is on Net Investment Income, which includes but is not limited to:

  • Interest
  • Dividends
  • Capital Gains
  • Rental Income
  • Royalty Income
  • Non-Qualified Annuity Interest

It is important to understand that if you will owe Net Investment Income Tax you should   plan ahead because if the estimated or quarterly tax payments that you make during the year does not cover the Net Investment Income Tax you may be subject to an estimated tax penalty in addition to the rest of your taxable income.

The Net Investment Income Tax, which went into effect January 1, 2013, and which applies at a rate of 3.8%, needs to be filed by those who have a modified adjusted gross income above specified thresholds.

Current thresholds for AGI + NIIT specified by the IRS as of December, 2014:

  • $250,000 – Married Filing Jointly
  • $125,000 – Married Filing Separately
  • $200,000 – Single
  • $200,000 – Head of Household (with qualifying person)
  • $250,000 – Qualifying Widow or Widower (with dependent child)

This article is intended to provide a brief overview of the Net Investment Income Tax and some of the qualification requirements. Because there are numerous regulations, and those regulations are subject to change by the IRS you may wish to contact an experienced tax advisor to better determine if you are required to file, what specific income should be included, and what expenses are deductible.