Just in time for the start of tax season, the IRS has released the final version of Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, which will be used by individuals and trusts and estates to compute the new 3.8% tax and then to report the tax on Forms 1040, U.S. Individual Income Tax Return, and 1041, U.S. Income Tax Return for Estates and Trusts. The final version of the form does not differ from the draft version released last August. Final instructions have not yet been posted.
Sec. 1411(a)(1) imposes a tax equal to 3.8% of the lesser of an individual’s net investment income for the tax year or the excess (if any) of the individual’s modified adjusted gross income for the tax year over a threshold amount. The threshold amounts are $250,000 for married taxpayers filing jointly and surviving spouses, $125,000 for married taxpayers filing separately, and $200,000 for other taxpayers. The tax also applies to estates and trusts, with different threshold amounts.
Taxpayers will use Form 8960 to calculate total investment income and total deductions and modifications (such as investment interest expense and state taxes) to arrive at net investment income. The form provides separate tax calculations for individuals and for trusts and estates. Individuals will report the net investment income tax on line 60 of Form 1040; trusts and estates will report it on Schedule G, line 4, of Form 1041.
—Alistair M. Nevius (email@example.com) is the JofA’s editor-in-chief, tax.