Net Investment Income tax – itemized

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  • #6460
    rk_tax
    Participant

    I tried posting in https://fairmark.com/forum/topic/net-investment-income-tax-2/ but did not work.
    I am taking standard deduction for my regular income tax but want to take itemized deduction for NIIT. I do not see where it is prohibited, The law says “Deductions allocable to both net investment income and excluded income. In the case of a properly allocable deduction described in section 1411(c)(1)(B) and paragraph (f) of this section that is allocable to both net investment income and excluded income, the portion of the deduction that is properly allocable to net investment income may be determined by taxpayers using any reasonable method.”

    The “in case of” does not apply to me! So can I take full SALT deduction of 10,000 in Line 9b of form 8960? It is also valid as per Section 67.

    #6475
    kaneohe
    Participant

    If you don’t itemize , it looks like you don’t get to deduct anything.

    Net Investment Income Tax


    January 5, 2019 at 2:29 am #1928

    Kaye Thomas
    Moderator
    It’s worse than you fear. The amount you can use in calculating NIIT is limited to “deductions allowed by subtitle A” (see (a)(2) of the reg). That means the amount you can deduct in calculating regular income tax. You don’t deduct state income tax you pay after the end of the year in calculating regular income tax, so you can’t deduct it in calculating NIIT. What’s worse, you can’t deduct anything paid within the same year to the extent it exceeds the new $10,000 limit on SALT deduction.

    If you don’t itemize, it doesn’t include anything.

    The only good news is that if the amount that would be allocable to net investment income without regard to the $10,000 limit is $10,000 or more, the entire $10,000 you deduct for regular tax purposes (assuming you do so) can be deducted for NIIT purposes. In other words, you don’t have to allocate the deductible portion between investment income and other income.

    #6625
    Lewis-H
    Participant

    There is no standard deduction for purposes of determining your net investment income. Itemized deductions are not available for purposes of reducing net investment income unless you itemize deductions for purposes of regular income tax. However, neither standard or itemized deductions reduce MAGI.

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