The National Directory of Certified Public Accountants

Ask A CPA - Tax Law changes - 2013

Net Investment Income - Definition - 3.8% Surtax

Generally, Net Investment Income will include interest, dividends,capital gains, annuities,royalties and rents and other income attributable to passive activities. Gains on the sale of property not used in an active business and income from the investment of working capital are treated as investment income. Net Investment Income is gross income or net gain reduced by deductions allocated to the income or gain. It does not include distributions from qualified plans,401(k) plans, IRS's, and eligible 457 plans or municipal bond interest or life insurance proceeds. The tax will not apply to the first $250,000 on profits from the sale of a personal residence, or to the first $500,000 in the case of a married couple selling their home.

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