Manendra Kothari is qualified Chartered Accountant from India and qualified and licensed CPA from US. He has 15+ years of total accounting and tax experience working on board of large and small public accounting firms. Call us : 847.340.0271 : Visit : http://schaumburgcpa.info

1. Find out if the Net Investment
Income Tax applies to you.
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2. What is the Net Investment Income Tax (NIIT)?
The Net Investment Income Tax is imposed by
section 1411 of the Internal Revenue Code. The NIIT
applies at a rate of 3.8% to certain net investment
income of individuals, estates and trusts that have
income above the statutory threshold amounts.
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3. When did the Net Investment Income Tax take effect?
The Net Investment Income Tax went into effect on
Jan. 1, 2013. The NIIT affects income tax returns of
individuals, estates and trusts, beginning with their
first tax year beginning on (or after) Jan. 1, 2013. It
does not affect income tax returns for the 2012
taxable year filed in 2013.
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4. What individuals are subject to the Net Investment Income Tax?
Filing Status Threshold Amount
Married filing jointly $250,000
Married filing separately $125,000
Single $200,000
Head of household (with qualifying person) $200,000
Qualifying widow(er) with dependent child $250,000
Individuals will owe the tax if they have Net Investment Income and also have
modified adjusted gross income over the following thresholds:
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Taxpayers should be aware that these threshold amounts are not indexed for inflation.
If you are an individual who is exempt from Medicare taxes, you still may be subject to the Net
Investment Income Tax if you have Net Investment Income and also have modified adjusted gross
income over the applicable thresholds.

5. What is modified adjusted gross income for purposes of the Net
Investment Income Tax?
For the Net Investment Income Tax, modified adjusted gross income
is adjusted gross income (Form 1040, Line 37) increased by the
difference between amounts excluded from gross income and the
amount of any deductions (taken into account in computing
adjusted gross income) or exclusions disallowed for amounts
described in section 911(a)(1). In the case of taxpayers with income
from controlled foreign corporations (CFCs) and passive foreign
investment companies (PFICs), they may have additional
adjustments to their AGI.
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6. What individuals are not subject to the Net
Investment Income Tax?
Nonresident Aliens (NRAs) are not subject to the Net Investment Income Tax. If an NRA is married to a U.S.
citizen or resident and has made, or is planning to make, an election to be treated as a resident alien for
purposes of filing as Married Filing Jointly, the final regulations provide these couples special rules and a
corresponding election for the NIIT.
A dual-resident individual, who determines that he or she is a resident of a foreign country for tax purposes
pursuant to an income tax treaty between the United States and that foreign country and claims benefits of the
treaty as a nonresident of the United States is considered a NRA for purposes of the NIIT.
A dual-status individual, who is a resident of the United States for part of the year and a NRA for the other part of
the year, is subject to the NIIT only with respect to the portion of the year during which the individual is a
United States resident. The threshold amount (described in # 3 above) is not reduced or prorated for a dual-
status resident.
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7. What estates and trusts are subject to the Net
Investment Income Tax?
Estates and trusts are subject to the Net Investment Income Tax if they have
undistributed Net Investment Income and also have adjusted gross income
over the dollar amount at which the highest tax bracket for an estate or
trust begins for such taxable year under section 1(e) (for tax year 2013, this
threshold amount is $11,950). Generally, the threshold amount for the
upcoming year is updated by IRS each fall in a revenue procedure. For
2014, the threshold amount is $12,150.
There are special computational rules for certain unique types of trusts, such
as Qualified Funeral Trusts, Charitable Remainder Trusts and Electing
Small Business Trusts.
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8. What estates and trusts are not subject to the Net
Investment Income Tax?
 The following trusts are not subject to the Net Investment Income Tax:
 Trusts that are exempt from income taxes imposed by Subtitle A of the Internal Revenue Code
(e.g., charitable trusts and qualified retirement plan trusts exempt from tax under section 501,
and Charitable Remainder Trusts exempt from tax under section 664).
 A trust or decedent’s estate in which all of the unexpired interests are devoted to one or more of
the purposes described in section 170(c)(2)(B).
 Trusts that are classified as “grantor trusts” under sections 671-679.
 Trusts that are not classified as “trusts” for federal income tax purposes (e.g., Real Estate
Investment Trusts and Common Trust Funds).
 Electing Alaska Native Settlement Trusts.
 Perpetual Care (Cemetery) Trusts.
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9. Contact Us
Manendra Kothari, CPA
1635 W Wise Road, Suite 10
Schaumburg IL 60193.
Ph: 847.524.0001 / 224.353.3344
E-Fax: 877.334.0712
Cell: 847.340.0271
E-mail: MKothari@SKTaxes.com
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