Reply To: Net Investment Income Tax

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Kaneohe: For 2018 my Net Investment Income on line 12 was less than MAGI minus $200,000 on line 15. However, that’s irrelevant, and I see now that the first paragraph of my original post was misleading, for which I’m very sorry. I can’t edit the post now, so I’m including the entire post as it should have read originally below:

In 2018 I had a large amount of Investment Income (76% of fed. AGI), and thus a large amount of state income tax. A big chunk of that 2018 state tax was paid in 2019. According to Kaye Thomas (see the Jan. 2019 thread below), I should be able to include that 2019-paid 2018 state income tax in calculating my 2019 NIIT.

Net Investment Income Tax

In 2019 I have a small amount of investment income (3% of fed. AGI) and much less state tax.

To calculate the amount of state tax to deduct on Form 8960, I am using the ratio suggested in the Form 8960 instructions: Investment income divided by Fed. AGI.

For the 2019-paid 2018 state tax I would like to use the 2018, rather than 2019, ratio of investment income to fed. AGI. I.e. 76% rather than 3%. Is this permissible?

(For the 2019 state tax the 3% ratio will be used.)

State income tax is my only deduction, and the above will result in a total deduction of $34,775, which must be reduced to $10,000 to be reported on Lines 9b and 11 of Form 8960. Since the Investment Income is only $6,290, the Net Investment Income will be zero.