Net Investment Income Tax

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The net investment income tax is a new tax charged at a flat rate of 3.8% which will apply for the first time on Federal income tax returns for 2013. This is a charge in addition to your Federal income tax and as the name might suggest, is charged on your net investment income.

At this stage, there is no opportunity to take a credit for any foreign taxes paid against this charge and so some US taxpayers will find that they have a tax liability on their US tax return for the first time. Those taxpayers residing outside of the US and claiming the foreign earned income or housing exclusions may also find that this will not provide relief to the new charge.

The tax will apply to anyone with ‘net investment income’ and whose ‘modified adjusted gross income exceeds the following thresholds:

  1. $250,000 for married taxpayers filing jointly.
  2. $125,000 for married taxpayers filing separately.
  3. $200,000 for single taxpayers and those filing as head of household.


Assuming a taxpayer has modified adjusted gross income in excess of the applicable threshold, the tax is imposed on the lesser of his net investment income or the amount by which his total income exceeds the threshold.

If you would like assistance with this or any other US tax matter please contact us.