IRS Form 8960 – Net Investment Income Tax

Print Friendly, PDF & Email

Form 8960 – Net Investment Income Tax— Individuals, Estates, and Trusts.  (Attachment to Form 1040 or Form 1041)

Individuals, estates, and trusts will use Form 8960 to compute their Net Investment Income Tax.

For individuals, the tax will be reported on, and paid with, the Form 1040. For estates and trusts, the tax will be reported on, and paid with, the Form 1041.

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.

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.

Calculating the Net Investment Income Tax for individuals is a four-step process.

  1. Calculate by how much modified adjusted gross income (MAGI) exceeds the relevant threshold.
  2. Calculate net investment income for the year.
  3. Take the lesser of the amounts in step 1 or in step 2.
  4. Multiply the amount in step 3 by 3.8% (the net investment income tax rate).

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.

Read more