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11 Net Investment Income Tax Questions, Answered

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Related: Top 10 HSA Questions, Answered

President Joe Biden recently proposed a budget for 2022 that imposes a net investment income tax to help fund the main Medicare trust fund. Today, revenue from the net investment income tax goes to the U.S. Treasury.

The investment income tax is a surtax of 3.8% in addition to the regular income tax that certain high-income taxpayers would otherwise owe on the income in question. The tax is imposed on the lesser of the following amounts: (1) Net investment income; or (2) The excess (if any) of the taxpayer’s modified adjusted gross income for the year over the applicable threshold amount. (For most taxpayers, MAGI is actually AGI.)

For advisors, understanding if your client is liable for this tax, and to plan for it if so, is imperative. In the gallery above are 11 important tax and financial planning questions advisors should be aware of in regard to the net investment income tax, according to ALM’s Tax Facts Online.

(Graphics: Chris Nicholls/ALM)


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