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Jonathan Wright is a single taxpayer with an AGI (and modified AGI) of $250,000, which includes...

Jonathan Wright is a single taxpayer with an AGI (and modified AGI) of $250,000, which includes $210,000 of salary, $25,000 of interest income, $15,000 of dividends, and $5,000 of long-term capital gains. What is Jonathan's net investment income tax liability this year?

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Answer #1

Modified Adjusted Gross Income (MAGI) = $250,000

Net investment income (NII) = Interest income + Dividends + Long-term capital gains

= $25,000 + $15,000 + $5,000

= $45,000

As per IRS, Net investment income is taxed at 3.8% of the lower of net investment income or the amount by which the MAGI exceeds the thresholds defined by IRS. The threshold for single taxpayers is $200,000.

Here, since Net investment income is lower,i.e.$45,000, net investment income tax liability = 3.8% * $45,000 = $1,710

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