Problem 1-27 Special Rules for High-Income Taxpayers (LO 1.9) Rachel is single and has wages of...

Problem 1-27
Special Rules for High-Income Taxpayers (LO 1.9)

Rachel is single and has wages of $150,000 and dividend income of $90,000. She has no investment expenses. Calculate the amount of the 3.8 percent net investment income tax she must pay.
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Expert Solution

"The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts." (Source: www.irs.gov)

	USD
Wages Income	150,000.00
Dividend Income (Net Investment Income)	90,000.00
Modified adjusted gross income	240,000.00

Threshold Income (for single taxpayers)	200,000.00

Excess than threshold (240,000-200,000)	40,000.00

Taxpayer's Net investment Income (dividend)	90,000.00

Net Investment Income Tax= 3.8% of Excess than threshold or Dividend income (whichever is less)

NIIT whichever is lesser	90,000*3.8%=	3,420.00
		or
	40,000*3.8%=	1,520.00

Net investment income tax she must pay is $1,520

ekkarill92 answered 1 year ago

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