Higher earners are more likely to owe an extra levy on investment earnings than a decade ago. But there are ways to reduce your tax bill, experts say.
Enacted as part of the Affordable Care Act health-care expansion, the 3.8% net investment income tax applies to capital gains, interest, dividends, rents and more once your so-called modified adjusted gross income, or MAGI, exceeds certain thresholds. MAGI can be higher than adjusted gross income because it adds back the foreign earned income exclusion.
While dozens of tax code provisions adjust for inflation every year, the thresholds for net investment income tax have remained the same since 2013 — MAGI above $200,000 for single filers and $250,000 for married couples filing together.