If you have income from investments you might notice a new tax. If you have regular income over a certain level and you receive investment income you may be responsible to pay this new tax, known as the Net Investment Income Tax. You will want to know a few basic rules about the new NIIT if you think you might be subject to it.

The Net Investment Income Tax is either applied at a rate of 3.8% on your income from investments or by the amount that your modified adjusted gross income in more than a limit set on your filing status, this is dependent on which is less.

You may be subject to the new tax if you have income from these sources below.

  • Interests & Dividends
  • Income from Rental Properties
  • Capital Gains Income
  • Income from Non-Qualified Annuity plans.

Most of the time NIIT does not include wages you would have earned, even if they are earned via self-employment. Other items such as Social Security benefits, unemployment compensation and alimony are not considered Net Investment Income. It also does not cover any income made from the sale of your home that is not included in your income.

You can deduct any credits you qualify for once you total your investment income. Any amount left over after deductions is considered your Net Investment Income. To figure out your MAGI or Net Investment Income and if you are responsible to pay taxes on it, you can use Form 8960.