Form 8960

Form 8960 is an IRS form used to report information about the ownership of specific tax-exempt organizations. This form is called Net Investment Income Tax. 

When you earn income from your investments,  you may owe this 3.8% tax on the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold amount for your filing status.

As of 2019, the threshold amounts are:

– $200,000 for single filers

– $250,000 for married filing jointly

– $125,000 for married filing separately

How to Calculate Form 8960

To figure out your net investment income, first, calculate your gross investment income. This calculation includes interest, dividends, capital gains, annuities, royalties, and rents. 

Then subtract certain allowable expenses, such as investment advisory fees and mutual fund expenses. The result is your net investment income.

Form 8960 Instructions

If you’re required to file Form 8960, use the instructions to fill out the form. These instructions will help you determine your filing status, net investment income, and modified adjusted gross income.

There are the steps to complete:

1. Determine your filing status.

2. Calculate your gross investment income.

3. Subtract certain allowable expenses.

4. Figure out your net investment income.

5. If you owe the Net Investment Income Tax, file Form 8960 and pay the tax using the payment instructions.

Remember that you must file Form 8960 if you’re subject to the net investment income tax. Failure to do so can result in penalties from the IRS.

When is 8960 useful?

The Net investment income doesn’t mean you will be subject to the Net Investment Income Tax (NIIT). The additional tax only applies if your modified adjusted gross income, or MAGI, is higher than a certain amount. The IRS calls this a “threshold,” depending on your filing status.

Your MAGI is a variation of the adjusted gross income (AGI) reported on your tax return form. However, these amounts are usually the same.

Also, if you own a specific tax-exempt organization, this form will help you report about the ownership. 

Who must file IRS form 8960?

Any U.S. citizen or resident can file Form 8960. Everyone with the MAGI over an applicable threshold amount, or a net investment income, should pay 3.8% of these, based on their filing status. Non-residents may also file Form 8960 if they’re subject to the net investment income tax.

You can file 8960 electronically or by mail. If you file electronically, you must use the IRS e-File system. You cannot e-File Form 8960 by itself; the filing must include your income tax return.

Next Steps

Explore our tax planning tools to take the most advantage of your investments. Get started with our CRT calculator. Or access our previous definitions to get a better idea!

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