The IRS has issued final rules khajane 2 challan and proposed guidelines for filing net income tax on investment (NIT) and net income on investment (NII) calculations. The tax, which became effective in 2013, will affect individuals. real estate and trusts whose income exceeds the specified criteria
For the tax year beginning January 1, 2013 (and every year thereafter), the tax on net investment income will be 3.8% of the lower value:
1. Net investment income for the year or
2. Excess (if any):
A. Personal Adjusted Gross Income (MAGI) exceeds:
b. Credit limit
The 3.8% tax is above any other khajane 2 challan and self-employment taxes you pay.
For tax purposes, MAGI means adjusted gross income excluding foreign income.
The threshold amount for this calculation is:
1. $250,000 for a taxpayer or a surviving spouse filing a joint tax return.
2. A married taxpayer of $125,000 files a separate tax return.
3. USD 200,000 in any other case
Net investment income is the sum of
1. Total income from interest, dividends, installments, royalties, and rent, except for those incomes arising from normal trade or business.
2. Other gross income from trade or business that is a passive activity for taxpayers
3. Net income from disposal of assets (other than assets held for trade or business)
4. Deduct any deductions that may be appropriately allocated to such gross or net income.
The term “business as usual” or “taxpayer passive activity” is of paramount importance. This would allow the large number of individuals who are involved in the leasing trade or business or are the passive owner of an S corporation to effectively avoid paying that tax. Certain groups may be elected to make their activities categorized as commercial or business or passive.
Trusts and real estate are also taxed on
1. Unappropriated net investment income, or
2. Adjusted gross income exceeds the dollar amount at the beginning of the maximum tax rate ($11,950 in 2013).
The individual income threshold is not tied to inflation for the next few years. Therefore, the number of taxpayers affected by this tax should increase over time. Trusts and estates, unlike individuals, have incomes linked to inflation.
The advice for calculating net capital gains tax on investments is complex. Great care must be taken in this regard to ensure that the minimum tax is paid. You should consult your accountant or tax advisor.
There’s also a new 8% Medicare tax on income above the threshold. Earned income includes wages and self-employment income.
