Tax Law Insights

Internal Revenue Code Sec. 1411, passed by Congress in 2012, introduced a new tax on passive income that went into effect on Jan. 1, 2013, the tax on "net investment income" (NII).

The new tax was created to help pay for health care reforms that were enacted in 2010. The rate is 3.8% of the lower of net investment income or the amount of modified adjusted gross income (MAGI) over specific thresholds. Modified adjusted gross income is adjusted gross income increased by the foreign earned income exclusion (but also adjusted for certain deductions related to the foreign earned income). For ...