Investment income is considered anything you earn passively, from a source for which you did not actively work. Typically, this income is earned from an investment, although only the amount that exceeds the expenses or capital losses associated with the investment counts. Examples of investment income include:
The tax on your net investment income only applies to that portion of the income that exceeds specific thresholds for individuals or couples. Miller & Company LLP, NY Certified Public Accountants, a best rated CPA NYC firm.
The net investment income tax, also known as NIIT, doesn’t include all of your income. For example, the following income sources don’t count toward your net investment income:
Put into effect in 2013, the net investment income tax is set at 3.8 percent. Keep in mind that this is net income, so you always get to subtract your expenses, fees and taxes already paid to arrive at the net sum. It only applies to individuals, trusts and estates. This is not a business tax.
For high net-worth individuals like you, your net investment income — less expenses — is taxable, if it exceeds certain income thresholds. Although the thresholds are subject to change and these figures haven’t been indexed for inflation, the IRS has published the thresholds for the net investment income tax as:
As a general guideline, if you gain any income from a passive investment and your adjusted income exceeds the threshold, you are taxed 3.8 percent on it. If you need help figuring out your tax burden, talk to a good NYC tax accountant to prepare your return. Since the tax code can be complex, especially regarding this relatively new tax, you can’t be expected to know the ins and outs as well as a professional tax accountant.
Miller & Company is an experienced tax accounting firm in Manhattan and the NYC metropolitan area. Their CPAs have answers if you have questions about the NIIT. If you have time to plan your taxes, your personal accountant may suggest conducting a tax audit defense in advance of your tax returns.
If you expect to earn investment income in the next year, especially if it’s a considerable sum, it pays to keep watch over your potential tax burden. A sudden bump in investment earnings can have significant tax implications. So instead of being shocked when your tax accountant prepares your return, asking for a pre-emptive tax audit brings to the fore any tax issues well before you need to submit the forms to the IRS.
With an accountant in NYC you can trust, you can have your taxes monitored year-round. The top CPAs at Miller & Company take a big-picture view of your finances. They review your personal and professional taxes, with an eye toward making your wealth work for you. The net investment income tax is simply one more item on the list to track when your New York CPA has your best interests in mind.
The NIIT requires some planning because it can affect other taxes. Get accounting assistance from your personal CPA. If you expect to earn a significant sum in passive income and your active income approaches or already surpasses the net investment income threshold, talk to your Manhattan CPA. Implications of the NIIT can include:
Do you have questions about services we offer including Net Investment Income Tax in NYC and Long Island? Would you like to receive a personal Net Investment Income Tax consultation customized to your specific needs? To schedule an appointment with a nationally recognized, best NY accountant, Paul Miller of Miller & Company LLP firm, please contact our Long Island or NYC tax accountants for a FREE CPA consultation.
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