Blog

Thus, if you currently have investments you potentially can get income from, we strongly advise you to take a look at Form 8960 and its filing requirements. Form 8960 is the IRS form used to calculate your total net investment income and determine how much of it may be subject to the 3.8% Medicare contribution tax. Participated in a rental real estate activity for more than 500 hours in any 5 tax years during the 10 tax years immediately prior to this tax year.

Distributions from certain Qualified Plans (those described in sections 401, 403, 403, 408, 408A or 457) such as qualified annuities. Passive income from investments which are not actively participated in. You can download a free copy of this form from the IRS website or by selecting the file below. Form 1041-QFT, Line 3, and the portion of Line 4 attributed to ordinary gain/. You’ll find annuity income in IRS Form 1099-R. Annuity income subject to NIIT will contain Code ‘D’ in Box 7. However, any income excluded using the Foreign Earned Income Exclusion must be added back on to the AGI when calculating the MAGI. ● IRC Section 1035 exchange (life insurance, long-term care insurance, and annuities)?

About Form 8960, Net Investment Income Tax Individuals, Estates, and Trusts

All information, files, software, and services provided on this website are for informational purposes only. As we have mentioned above, wages and self-employment earnings are not considered net investment income. Instead, the IRS identifies interest, dividends, monthly rental and lease payments , royalties, and profits from trading stocks as such income. CS Professional Suite Integrated software and services for tax and accounting professionals. The information provided is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager. If you have investment income and go over the MAGI threshold, the 3.8% tax will apply to your net investment income or the portion of your MAGI that goes over the threshold—whichever is less.

When we saw that this new, complex area of the law would ultimately be computed on a one-page form, we anticipated that the meat of the computation would be done off-form in worksheets provided by the instructions. But that shifts the onus back to us as tax advisors to make sure our inputs are correct, which means we must understand the nuances of the final regulations. Properly allocable to those items of gross income or net gain to arrive at the NII. In the 2012 tax year, Congress passed a Medicare surtax on investment income at a tax rate of 3.8% as part of the Health Care and Education Reconciliation Act of 2010 to help pay for the Affordable Care Act.

Need more information on tax strategies and planning?

It is important to understand what types of investment income is included in NII and what type of investment income is excluded. Investment assets such as bonds, stocks, mutual funds, annuities, loans, and other investments . While you are living outside the United States as an expat, the filing deadline for the U.S. tax return is June 15 each year . Individuals filing Form 1040-NR will include only the amount of investment interest expense deduction for the period of U.S. residency. Individual taxpayers will enter the interest expense paid or accrued during the tax year that was deducted on Schedule A , Line 9. For more complicated estate and trust situations, the IRS instructions contain additional details.

The trust’s taxable income reported on Form is $48,898 ($90,000 + $30,000 – $50,000 – $22,500 + $1,398). The https://turbo-tax.org/ trust’s undistributed net investment income is $61,398 ($90,000 + $30,000 – $37,500 – $22,500 + $1,398).

Explaining the Tax and Its Purpose

The software will default to carrying amounts to Form 8960, however, adjustments may be needed on screen 8960 if the real estate income is exempt from NII. See the Form 8960 line instructions and the note about real estate professionals for details.

The IRS merely issued instructions to aid in the population of the 33 total lines found on the draft form. A recurring theme among these presentations has been the clamoring of advisors for the release irs form 8960 of instructions to the previously-published draft Form 8960, upon which we will be computing our client’s liability for the 3.8% tax. Deductions for contributions to IRAs or other qualified plans.

Premium Investing Services

Original supporting documentation for dependents must be included in the application. Payroll Payroll services and support to keep you compliant. Bookkeeping Let a professional handle your small business’ books.

• Please ensure to check the amended and revised application categories on the IRS official website regarding the accounting year you file for.
• You can also file your own taxes with TurboTax Premier.
• This includes interest, dividends, capital gains, annuities, rental profits and royalties.
• This course is not open to any persons who are currently employed by or seeking employment with any professional tax preparation company or organization other than H&R Block.
• Gains on property held in a trade or business may also be exempt.

● The 3.8% Net Investment Income Tax is in addition to the long-term capital gains tax rates. If our long-term capital gain tax rate is 20% and we are subject to the 3.8% Net Investment Income Tax. You take your adjusted gross income then add back certain deductions and exclusions to get your modified adjusted gross income. Thus, the standard deduction or the itemized deduction do not play a role in calculating your modified adjusted gross income. When you hear people talk about “the line,” they are referring to your adjusted gross income . Above the line deduction can lower your adjusted gross income and below the line, such as the standard deduction or the itemized deduction, cannot lower your adjusted gross income. I like above-the-line deductions because you can do a lot of creative planning to qualify for certain deductions and credits.