New Tax on Net Investment Income

Aug 22, 2014 | Insights | 0 comments

niit_smlAs part of the changes to the Medicare System and the Affordable Care Act, on January 1, 2013 came into force a new type of tax: the Net Investment Income Tax (NIIT)

To better understand this new tax, we will discuss some of the most common questions that have arisen during our study of this emerging regulation.


What is the Tax on Net Income from Investments?
The Tax on Net Investment Income is an additional tax at a rate of 3.8% based on the lesser of the following incomes:

  • Modified Gross Income adjusted over a certain amount, or
  • Net income from investments.

Who does this tax applies to?
The tax on net investment income applies to U.S. citizens and resident aliens. This tax does not apply to non-resident aliens, unless they elect to be treated as U.S. residents for tax purposes.

How is this new tax applies to individuals?
The tax on net investment income applies only if the modified AGI (Adjusted Gross Income – Modified MAGI ) for the year exceeds the following amounts:



What type of income qualifies for this tax?
Revenues that are considered for the tax on net investment income are classified into three categories:

Category One

  • Interests
  • Dividends
  • Annuities
  • Copyrights
  • Rents (except income received as part of a trade or business)

Category two

  • Income from a trade or business other than passive income
  • Income arising from negotiation of trade financial instruments or commodities

Category Three

  • Net capital gains (other than gains from property in a trade or business)

Any new legislation brings doubt and uncertainty. At GBS Group we are prepared to answer any questions or queries regarding tax issues.

Thanks to the knowledge and expertise of our specialized consultants, we offer the best alternatives within the legal framework, established and updated to the latest changes in the system. If you are looking for help relating to taxation, contact us and we will guide you to all the new and stablished regulations.