The net investment income tax is a relatively new tax that can apply to certain types of investment income, including rental income from real estate properties. Understanding when rental income is subject to this additional 3.8% tax is important for landlords and real estate investors aiming to maximize returns. This article will examine the key factors that determine when rental income gets hit with the net investment income tax.
What is the net investment income tax?
The net investment income tax is a 3.8% tax that was introduced under the Affordable Care Act in 2013. It applies to certain types of investment income for individuals above specified income thresholds…
When does the net investment income tax apply to rental income?
Rental income from real estate is generally subject to the net investment income tax when it comes from a rental property that is not considered a trade or business…
Understanding the rules around when rental income is subject to the 3.8% net investment income tax is crucial for real estate investors. Key factors include whether the property is a trade or business and the taxpayer’s total income.