Question

Mitch, a single filer, had wages of $208,000 in the tax year. He earned an additional $15,000 in income from dividends and capital gains. He had no other income or adjustments. What is Mitch's net investment income tax?

Answer 1

Calculation of net investment income tax:

If the filing status is single then the MAGI (modified adjusted gross income) then the net investment income tax applies only if the limit exceeds 200,000

To calculate the net investment income the threshold figure should be subtracted from the gross income & the net investment income tax is calculated on the lowest of net investment income or the gross income.

So in this case:

It is calculated on 208000-200000 or 15000. In this case the lowest is 8000 & is multiplied by 3.8%

= 8000*3.8%

= 304

Net investment income tax is 304.