What triggers IRS Form 8960?
Attach Form 8960 to your return if your modified adjusted gross income (MAGI) is greater than the applicable threshold amount. Use Form 8960 to figure the amount of your Net Investment Income Tax (NIIT). Controlled foreign corporation (CFC).
Is Schedule C income subject to net investment income tax?
B and C are subject to NIIT on the lesser of $225,000 (B’s Net Investment Income) or $50,000 (the amount B and C’s modified adjusted gross income exceeds the $250,000 married filing jointly threshold).
Are life insurance proceeds subject to net investment income tax?
Municipal bonds: These will reduce both net investment income tax and MAGI. Tax-deferred annuities: Earnings from this type of annuity are not taxed until withdrawn. Life insurance: Paid-out death benefits are generally exempt from the 3.8% tax because they are excluded from gross income.
Can you deduct brokerage fees on form 8960?
For instance, brokerage fees that are not properly allocable will not be allowed as a deduction. The instructions to Form 8960 provides examples of deductions that are not deductible for NII purposes. For example, deductions for contributions to IRAs or other qualified plans.
How do you avoid net investment tax?
It’s net investment income and not gross investment income. If we can increase investment expenses to lower our net income, that is another way to avoid the Net Investment Income Tax. Examples of expenses are rental property expenses, investment trade fees, and state and local taxes.
Who is subject to net investment income tax?
The net investment income tax (NIIT) is a 3.8% tax on investment income such as capital gains, dividends, and rental property income. This tax only applies to high-income taxpayers, such as single filers who make more than $200,000 and married couples who make more than $250,000, as well as certain estates and trusts.
Who pays 3.8 net investment tax?
Effective Jan. 1, 2013, individual taxpayers are liable for a 3.8 percent Net Investment Income Tax on the lesser of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory threshold amount based on their filing status.
What income is subject to 3.8 net investment tax?
How do you calculate 9b on Form 8960?
Form 8960, Line 9b = total state 20xx tax payments * federal NII (Form 8960 line 8) / Federal AGI (Form 1040 line 38)
How is Form 8960 Line 9b calculated?
The formula for Line 9b is: (Total investment income) divided by (total adjusted gross income) multiplied by (state, local and foreign taxes).
Where do the 2020 2020 instructions for form 8960 references come from?
2020 Instructions for Form 8960 Net Investment Income Tax—Individuals, Estates, and Trusts Department of the Treasury Internal Revenue Service Section references are to the Internal Revenue Code unless otherwise noted. Future Developments For the latest information about developments related to Form 8960 and its instructions, such as legislation
What is the purpose of form 8960?
Use Form 8960 to figure the amount of your Net Investment Income Tax (NIIT). Controlled foreign corporation (CFC). Generally, a CFC is any foreign corporation if more than 50% of its voting power or stock value is owned or considered owned by U.S. shareholders (as defined in section 951 (b)) on any day during the tax year.
How do I enter net investment income on form 8960?
On the S portion’s Form 8960 worksheet, enter the S portion’s net investment income on line 7 of the trust’s Form 8960 and combine line 19a of the Form 8960 worksheet with the non-S portion’s AGI to arrive at the amount on line 19a. . See Regulations section 1.1411-3 (c) for more details and examples.
What line does income from CFCs go on form 8960?
Also, income derived from CFCs and certain PFICs you hold in a section 1411 trade or business is generally reported on Form 8960, line 4a. Line 6 is used for adjustments that are the result of additional rules.