How to Calculate Modified Adjusted Gross Income (MAGI) Related expenses might include commissions and tax preparation fees. This includes profits you realized when you sold investments, dividend and interest payments you received and income from rental properties, among other forms of investment income defined by the IRS.
Net investment income is calculated by adding up all of the income you earned from investments in the past tax year and subtracting any related expenses. In practical terms, this means that in addition to net investment income, you’ll also need your modified adjusted gross income (MAGI) to compute your NIIT. It only applies to incomes that are above the thresholds highlighted above. But not everyone who makes income from their investments is impacted. The net investment income tax is a 3.8% surtax that is paid in addition to regular income taxes. How to Calculate Net Investment Income Tax Withdrawals from Roth accounts, on the other hand, are not. Pension payments and withdrawals from tax-deferred retirement accounts are both taken into account in calculating net investment income.
NIIT can be of particular concern to retirees who pay for their living expenses from investment income.
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