3.8% Net Investment Income Tax

This is a new tax for 2013 on the lesser of net investment income or the amount that adjusted gross income exceeds $250,000 for joint returns or $200,000 for single returns. For example, a couple filing jointly having net investment income of $100,000 and adjusted gross income of $300,000 would pay a tax of $1,900($300,000-$250,000 x .038) since the excess adjusted gross income of $50,000 is less than the net investment income of $100,000. The tax is computed on new form 8960. Net investment income includes taxable interest, ordinary dividends, royalties, net gains from the sales of stocks, securities and investment real estate, rental income, and passive income reduced by allocable deductions such as investment interest expense, brokerage fees, and rental expenses.