Form 8960 is used to calculate the Net Investment Income Tax (NIIT) when a taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds the applicable threshold. The NIIT is a 3.8% tax on the lesser of:
(a) The taxpayer’s net investment income, OR
(b) The amount by which their MAGI exceeds the applicable threshold.
Who Needs to File Form 8960?
U.S. citizens and residents must file Form 8960 if they meet the following conditions:
✔️ Their Modified Adjusted Gross Income (MAGI) exceeds the applicable threshold.
✔️ They have net investment income, which includes interest, dividends, capital gains, rental income, and other passive investment earnings.
Thresholds for NIIT Based on Filing Status
Married Filing Jointly / Qualifying Widower with Dependent Child → $250,000
Married Filing Separately → $125,000
Single / Head of Household → $200,000
How to Access Form 8960 in the Software
To enter Net Investment Income Tax (NIIT) details, follow these steps:
Navigate to the Federal Section
From the left-side menu, select Federal Section > Other Taxes.
Choose Net Investment Income Tax (Individuals, Estates, and Trusts).
Enter Income Adjustments and Expenses
Input any adjustments to income and any additional expenses related to investment income in the designated fields.
Final Notes
✔️ Form 8960 applies only to passive income sources—earned wages are not subject to NIIT.
✔️ The 3.8% tax applies only to the portion of income that exceeds the applicable threshold.
✔️ Investment-related expenses may be deducted to reduce net investment income.
By following these steps, taxpayers can accurately report and calculate Net Investment Income Tax using Form 8960 in 1040-SR Web-Based.