The Net Investment Income Tax: Installment Sale Election

Posted October 21, 2013

tax-relief-serviceAuthor: Denise M. Holmes, CPA | Partner

For taxable years beginning after December 31, 2012, many taxpayers will be subject to a new tax under Internal Revenue Code §1411.  Section 1411 imposes a 3.8% tax on net investment income (NII) of individuals, estates, and trusts with income above certain statutory threshold amounts ($200,000 for single taxpayers and $250,000 for joint filers).  For individual filers, NII tax is equal to 3.8% of the lesser of their total NII for the taxable year or their modified adjusted gross income above their threshold amount.  Trusts and estates are subject to the 3.8% NII tax on the lesser of their undistributed net investment income for the taxable year or the amount of gross income taxed at the highest tax bracket for the taxable year. Read more.