How the Net Investment Income Tax Hits Your Passive Returns

In this episode of The Tax Policy Podcast, Lucas and Luna break down the Net Investment Income Tax (NIIT)—a 3.8 percent surtax that applies to investment earnings above certain income thresholds. We explore how this tax, originally enacted to fund the Affordable Care Act, now affects high-income households, with real numbers: someone filing single with modified adjusted gross income above $200,000 pays NIIT on the lesser of their investment income or the amount over the threshold. Using a concrete example of a couple earning $350,000 with $40,000 in rental income and dividends, we show how an extra $1,520 in tax can sneak in. We discuss why NIIT triggers on active business income for passive investors like limited partners, and how many filers don't realize rental real estate income counts until they pass the $150,000 adjusted gross income mark. The episode also covers the interaction between NIIT and the Additional Medicare Tax, and why careful planning on Roth conversions or selling appreciated assets matters. A must-listen for anyone managing investment portfolios near the thresholds. #NetInvestmentIncomeTax #NIIT #PassiveIncome #InvestmentTax #MedicareTax #AffordableCareAct #Surtax #CapitalGains #Dividends #RentalIncome #TaxPlanning #HighIncomeHouseholds #AdditionalMedicareTax #RothConversion #LimitedPartners #Economics #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo