What is Net Investment Income?
When you get income from the investment of your assets this is known as net Investment. The assets that you would get net investment income are loans, stocks, bonds and mutual funds and other investments. The net investment income depends on whether it is capital gains, interest income or dividend income and then subtract any administrative fees paid and can be calculated for both companies and individuals. The rate of the net investment income tax is 3.8% and it applies to any estates, individuals and trusts that have incomes above the statutory threshold amounts.
Net investments income can have tax implications for some individuals. It applies to the individuals who have net investment income as well as modified adjusted gross over these thresholds:
Filling Status Threshold Amount
Married filing jointly £250,000
Qualifying widow(er) with dependent child £250,000
Single £200,000
Head of household (with qualifying person) £200,000
Married filing separately £125,000
The net investment income tax is based on the amount that the individual exceeds the threshold or their net investment income.
Why does Net Investment Income matter?
The profit from the investment in companies are measured for investment income. Individual investors can also have investment income however investment income can often be taxed differently than other income.
To calculate Net Investment Income
All you have to do is put the net investment income, which is the total profit (or if the business isn’t going well then you would put the loss) of the company or individuals earns from the investments that they have, before taxes are accounted for. This will include:
- Rental income
- Passive business profits
- Capital gains
- Certain annuities
- Royalty Income
- Interest income
- Dividend income
Any other investment related fees or administrative fees are subtracted from the net investment income. Which this means any investment advisory fees, expenses related to rental income, tax preparation fees and investment interest expense.
Net Investment Income + Investment Profits – Fees
