Treasury Issues Final and Newly Proposed Regulations Covering the Net Investment Income Tax


Enacted in 2010 to pay, in part, for healthcare reform, the net investment income (NII) tax is imposed on “unearned income” beginning January 1, 2013. Internal Revenue Code section 1411 imposes a 3.8% tax on the lower of an individual’s NII or “modified adjusted gross income” above a threshold, which is $250,000 for married filing jointly taxpayers, or $200,000 for a single taxpayer.

NII essentially taxes three classes of income (after taking into account properly allocable deductions): (a) gross income from interests, dividends, rents, and royalties (portfolio bucket), (b) gross income from trading and passive activities (trading/passive bucket) and (c) net gains from dispositions from all assets other than active trades or businesses (net gain bucket).

On November 26, 2013, Treasury released final and newly proposed regulations (the final regulations and the 2013 proposed regulations), which supersede the proposed regulations released in November, 2012 (the 2012 proposed regulations) [see below for effective dates]. While we are still assessing the broader implications of the new rules, we wanted to highlight a few key items impacting the alternative investment management industry.

Download the PDF for additional information on final and newly proposed regulations covering the net investment income tax.

Contact information

For additional information or questions, please contact:

Ted Dougherty
National Managing Partner, Investment Management Tax
Deloitte Tax LLP
+1 212 436 2165
  Jim Calzaretta
Deloitte Tax LLP
+1 312 486 9138
Amy Sutton
Deloitte Tax LLP
+1 713 982 4047


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