Article Date:
May 2022

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How Rental Property Owners Can Avoid the Net Investment Income Tax

The federal income tax tables do not give you your “true” tax rates.


Here’s one example: the net investment income tax (NIIT). It’s a hefty 3.8 percent on top of what you pay according to the table rates.


If you own rental property, you’re one of the NIIT’s prime targets.


But in this article, we’ll show you three ways you can remove yourself from the NIIT bull’s-eye.


Who Is Subject to the NIIT?


You pay the NIIT only if1



your modified adjusted gross income (MAGI) exceeds $200,000 if you’re single, or $250,000 if you’re married filing jointly ($125,000 for married couples filing separately), and


you have net investment income.


Your MAGI for NIIT purposes is likely the same as your adjusted gross income (AGI), which equals your gross income less any above-the-line deductions. The tax code modifies the NIIT AGI only for certain U.S. citizens or residents who live abroad.


Net investment income consists of2



net rental income;


income from investments, including interest, dividends, and annuities;


income from any business in which you don’t materially participate, including real estate limited ... Log in to view full article.

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