Symptoms: Individuals may have to pay an additional 3.8% tax on the lessor of net investment income (NII) or the excess of modified adjusted income over $200,000 for single filers/ $250,000 for married joint filers. Net investment income tax (NIIT) is effective as of January 1, 2013.
Diagnosis: Net investment income includes most taxable income from securities as well as passive rental and business activity. Exclusions from NII include compensation, retirement income, self-employment income, tax-exempt income, social security, and active trade or business.
The above covers the basics; however there are more complexities to the tax. The final tax regulations released late in November 2013 are over 200 pages and cover numerous situations. The main complexities relate to business and real estate investment treatments.
Remedies: Investment, tax and business strategies may need to be reviewed in effort to reduce the tax. Please contact us to further discuss your situation.