That includes a tortuous calculation of a 2% excise tax on net investment income.
Net investment income will be counted toward earnings for the phase-out, thereby raising taxes.
First the 3.8% Obamacare tax that applies to net investment income kicked in Jan. 1.
FORBES: Tax Hikes Hit Trusts Hard, Beneficiaries Pull Money Out
It reported a net investment loss of 0.09% in 2009 and net investment income of 5.43% in 2008.
Interest paid to an employee by an employer under a nonqualified deferred compensation plan is not considered net investment income.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 1
Net investment income does not include distributions from a qualified plan described in Sections 401(a), 403(a), 403(b), 408, 408A or 457(b).
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 1
One thing to note is it is the lesser of net investment income or excess adjusted gross income over the threshold.
Net Investment Income plays an integral role in determining the effects of the 3.8% Medicare Surtax for a taxpayer and his investments.
As discussed in Part 1, this separately stated income will be included within the definition of net investment income by virtue of Prop.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities
By materially participating, the ordinary income of the corporation will not be included in your net investment income, and by virtue of Rev.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities
This means that for individuals who have little or no net investment income, their 3.8% Medicare Surtax will be minimal if not zero.
FORBES: What the New 3.8% Medicare Surtax Means for You And Your Investments
Again, the inclusion of this Schedule K-1 interest and dividend income within your net investment income was a completely predictable result of the proposed regulations.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities
Finally, there is a new 3.8% flat tax on net investment income unless the investor has sold an actively managed business for a total of about 25%.
Perhaps the most important of these terms is Net Investment Income.
On page 1 you will find an overview of the net investment income tax regulations, complete with key definitions and the mechanical application of the tax.
FORBES: Obamacare Investment Income: A Downloadable Cheat Sheet
Is that portion of the gain considered net investment income?
FORBES: Mailbag: Is Gain Attributable To The Sale Of Goodwill Included In Net Investment Income?
One new piece of tax legislation of particular interest that will be the focus of this and the next several posts is the new 3.8% net investment income tax.
FORBES: What the New 3.8% Medicare Surtax Means for You And Your Investments
Interest earned on state and local bonds that is exempt from income tax under Section 103 is excluded from the definition of net investment income for purposes of Section 1411.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 1
Thus, despite the fact that Hansel has both net investment income and MAGI in excess of his applicable threshold, he does not owe the 3.8% on all of his investment income.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 1
Thereafter, the adviser will collect quarterly 100% of net investment income generated between a 7% and 8.75% (2.1875% quarterly) yield, and 20% of net investment income that exceeds an 8.75% yield.
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You first calculate your overall AGI minus the threshold amount and then determine the amount of net investment income above this that will be subject to tax using some straightforward calculations.
Naturally, I opined that a taxpayer would be foolish not to make this election, lest they be forced to include more gain in net investment income than necessary in future years.
As you will see in the subsequent posts, materially participating in an activity, whether it be an S corporation, partnership or sole proprietorship, is a prerequisite to excluding any income from net investment income.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 1
Although not included as an income tax rate increase, next year individuals will be reporting and including the new Net Investment Income (NII) tax (also known as the Medicare surtax) with their Form 1040.
Section 1.1411-4(a)(1)(i) will constitute net investment income.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 1
Before the issuance of the proposed regulations, few would have imagined that the operating income of a business could be included within the definition of net investment income, but as the ensuing review reveals, this is unfortunately not the case.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities
It begins with a 15% flat rate, but taxpayers who cross certain income thresholds owe more because of the 3.8% net investment income tax, the Pease limit and the Personal Exemption Phaseout, or PEP, a backdoor increase that limits personal exemptions.
Meeting the standard of material participation, and thereby turning an activity from passive to nonpassive, is obviously a critical consideration, for if an activity is passive, all of the income allocated to the individual owner will constitute net investment income under Prop.
FORBES: Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities
Please stay tuned as we explore the key elements that compose the 3.8% Medicare Surtax such as the critical net investment income calculation, comments and suggestions that noted tax professionals have raised, and exactly how this new tax will affect you and your checkbook.
FORBES: What the New 3.8% Medicare Surtax Means for You And Your Investments
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