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IRS Releases Draft of Form 8960 Net Investment Income Tax, the 3.8% Medicare Tax for 2013

On August 7, 2013 the IRS released the first draft of the Form 8960 Net Investment Income Tax. Form 8960 will report the new 3.8% Medicare tax on net investment income and will be filed with the 2013 Form 1040 U.S. Individual Income Tax Return and 2013 Form 1041 U.S. Income Tax Return for Estates and Trusts.

Beginning this year, individuals, estates and trusts whose modified AGI (adjusted gross income) exceed the threshold amount will be subject to the new 3.8% Net Investment Income Tax (NIIT). The threshold amounts are:

Married Filing Joint – $250,000
Married Filing Separate – $125,000
Single/Head of Household – $200,000
Estates/Trusts – $11,650

Net investment income for purposes of the NIIT calculation includes dividends, interest, rent, royalties, commercial annuities, net capital gains on assets that produce net investment income and passive trade or business income as well as income from financial instrument trading.  Net investment income is the income after deductions for expenses that are “properly allocable” to the income.

Investment income does not include wages, active business income, pension/IRA distributions, or tax-exempt income.  See Henry & Horne blog “Big Changes Coming Under PPACA in 2013 – Part 2 Individuals” for additional information on the calculation.

The IRS is accepting comments on Form 8960 until September 27th.  The instructions for Form 8960 will be released later this year.

Melinda Nelson, CPA


  1. Dorothy Simpson says:

    I am age 66 and took 100% distribution of my 403(b) to pay down my mortgage. This brought my AGI up to $260,000. Does this count as “Net Investment Income” or is the total distribution of my 403(b) exempt from this?
    Thank you very much.

    • admin says:

      Hi Dorothy –

      retirement plan distributions are not considered “net Investment Income” for purposes of the 3.8% tax.

      Thanks for reading the blog,

      Melinda Nelson, CPA

  2. […] 2. You normally can exclude up to $250,000 of the gain from your income ($500,000 on a joint return). This excluded gain is also not subject to the new Net Investment Income Tax, which is effective in 2013. (For more on that topic, please click here.) […]