Question

Are there ways to plan around the net investment income tax? explain the 4 ways in 4 paragraph

Answer 1

	Section 1411 of the Internal Revenue Code deals with the NIIT.
	Applies to only a few net investment income at a 3.8 percent rate,
	includes incomes from Interest, dividends, rent etc which are normally earned passively.
	The NII tax applies to taxpayers whose modified adjusted gross income (MAGI) exceeds the following thresholds:
	Single filer: $200,000
	Joint filer: $250,000
	Married filing separately: $125,000
	Head of household: $200,000
	Estates/Trusts $12,125 ( on its undistributed income)
	Some of the following strategies may be adopted to reduce the quantum of NIIT.
1	Reduce your MAGI : Focus on the threshold limits and try to limit the income from these so that it do not go beyond the specified.
2	Redude your Investment income : Another option is to limit the investment income or rather divert the nature of taxability to non-
	taxable nature like investing in municipal bonds, buying corporate bonds at a discount, shifting income to a family members etc
	Investing in life insurance and tax-deferred annuity products is also another option.
3	Alter your business structure so that you get more deductions : There are many solutions under this category, some of which are
	listed below .
	Setting up a charitable trust, Cemetry or an exempt trust.
	Become a realtor so that all the losses can be booked and many deductions cans be availed.
	Swap the properties. Sell the appreciated assets and buy the loss bearing investments.
	Pay your advisors for the services taken.
4	Take an active role in your business : Lastly and predominantly shifting base of the passive income to active income is to
	shift the earning potential from passive to active nature of income. This will not only shift the timing of taxing but also the very
	nature of the nature of income.When all of the above fails, this method can be tried.