NIIT

Question 1

What is NIIT?

Answer 1

• It is net investment income tax that applies to certain net investment income of individuals, estates, and trusts that have income ABOVE threshold amounts

Question 2

What does NIIT apply to?

Answer 2

• Interest
• Dividends
• Capital gains
• Rental and royalty income
• Nonqualified annuities
• Income from business involved in trading of financial instruments or commodities
• Businesses that are passive activities to the taxpayer

Question 3

NIIT and additional Medicare tax?

Answer 3

• Taxpayer may be subject to both NIIT and additional Medicare tax,
  
  • BUT NOT ON THE SAME TYPE OF INCOME
• Remember that medicare tax is applied on wages, compensation and SE income, not on investment income.