What's the Net Investment Income Tax and How does it Apply to Me?

August 2020 Article by:

Matthew A. Dolan & Roman A. Basi
Basi, Basi & Associates at The Center for Financial, Legal & Tax Planning, Inc.

The Net Investment Income Tax (NIIT) effects most taxpayers; however, it has a more substantial impact on business owners and investors. Under the Internal Revenue Code (IRC) Section 1411, the NIIT was created and placed into effect on January 1, 2013. The NIIT is applied at a rate of 3.8% to certain net investment income of an individual and for trusts and estates that have income above the statutory thresholds. These thresholds, unlike most, are NOT annually adjusted for inflation.

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