The 3.8 percent Net Investment
Income tax applies to individuals, estates and trusts
that have certain investment income above applicable threshold
amounts. The Net Investment Income Tax (NIIT) applies in
the case of married filing separate individuals, at a rate of
3.8 percent on the lesser of their net investment income or the
excess of modified adjusted gross income over $125,000. In
the case of married filing jointly individuals, it applies at a rate of
3.8 percent on the lesser of their net investment income or the
excess of their modified adjusted gross income over $125,000. In the case of
filing single individuals, at a rate of 3.8 percent on the lesser of their
net income or the excess of their modified gross income over $200,000.
In the case of an estate or trust, the new tax of
3.8 percent applies on the lesser of the undistributed net
investment income or the excess of the adjusted gross income over the dollar
amount at which the highest tax bracket begins for an estate or trust for
the tax year. For estates and trusts, the 2013 net investment
income tax threshold is $11,950.
In general, investment income, for purpose of
the net investment income tax, includes net gains from the disposition of property
other than property held in a trade or business in which the NIIT does
not apply.The NIIT does not apply to certain types of
income that are excluded for regular income tax purposes such as
tax-exempt state or municipal bond interest, Veteran Administration benefits
or the excluded gain from the sale of a principal residence. In order to avoid certain penalties, taxpayers
may need to increase their income tax withholding or estimated
taxes to consider any additional tax liability associated with the NIIT.
You may owe
this tax if you have income from investments. Also, you may owe this tax if
your income goes over certain limits. Net investment income amounts include
income from interest, dividends, capital gains, rental and royalty and
non-qualified annuities. There are other income items to consider. However,
net investment income does not include wages and most self-employment income
or unemployment compensation. Additionally, net investment income does not
include Social Security benefits or alimony. Furthermore, net investment
income does not include any gain on the sale of your main home which you
exclude from your taxable income. If you owe the Net Investment Income Tax,
you must use Form 8960 with your tax return.
Same Gender Marriage
The protections
under federal tax law for same-sex married couples started on September 23,
2013. As a result of this new benefit for same-sex couples, the IRS issued
tax guidance for employers and employees. These include instructions on
claiming refunds or adjusting FICA tax and employment tax items with respect
to certain benefits provided for same sex spouses. The new laws apply
regardless of where the couple lives. The couple can live in an area that
recognizes same-sex marriage or a one that does not recognize the same-sex
marriage. The new same-sex marriage ruling applies to all federal tax laws
in the same manner that it applies to all couples filing a married filing
jointly or married filing separate return. Couples can file amended returns to take
advantage of the new tax law that includes the same-sex benefit provisions.
A same-sex couple can file an amended return for prior years under the
statute of limitations for filing amended tax returns, which is the later of
three years from the date the tax return was filed or two years from the
date the tax was paid. Same-sex couples can file an amended return by using
Form 1040x.
