IRS releases draft copy of new investment tax form

On Wednesday, the IRS released a draft of Form 8960, Net Investment Income Tax applicable to Individuals and Estates and Trusts.


Starting in 2013, Code Section 1411(a)(1) imposes a tax equal to 3.8% of the lesser of an individual's net investment income for the tax year of the excess of the individual's modified adjusted gross income for the tax year over a threshold amount. 


The threshold amounts are:


$250,000 for married couples filing a joint return

$200,000 for single filers

$125,000 for married filing separately


Example: if net investment income for a married couple filing jointly is $20,000 and their modified AGI is $260,000, the 3.8% tax applies to $10,000 of income.



The tax applies to estates and trusts with adjusted gross income over a "threshold amount" equal to the dollar amount at which the highest tax bracket begins for the tax year.  For 2013, the threshold amount for trusts is $11,950.


The tax is not deductible and is not withheld by an employer.  The tax must be counted in determining whether taxpayers are required to make quarterly estimated tax payments throughout the year.


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