Instructions For Form 8960 (2015)


Department of the Treasury
Internal Revenue Service
Instructions for Form 8960
Net Investment Income Tax—
Individuals, Estates, and Trusts
is a trade or business of trading in financial
Section references are to the Internal Revenue
Social Security benefits,
Code unless otherwise noted.
instruments or commodities. See section
Tax-exempt interest income,
1411(c)(2) and Regulations section
Income from certain qualified retirement
Future Developments
plan distributions, and
Income subject to self-employment
For the latest information about
developments related to Form 8960 and
For the NIIT, certain items of investment
its instructions, such as legislation
Net investment income. Generally, net
income and investment expense receive
enacted after they were published, go to
investment income includes gross income
different treatment than for the regular
from interest, dividends, annuities,
income tax. Therefore, you need to keep
royalties, and rents, unless they are
all records and worksheets for the items
General Instructions
derived from the ordinary course of a trade
you need to include on Form 8960. Keep
or business that is not (a) a passive
all records for the entire life of the
activity or (b) a trade or business of trading
investment to show how you calculated
in financial instruments or commodities. In
These instructions are based mostly on
basis. You will need to know what you did
addition, net investment income includes
Regulations sections 1.1411-1 through
in prior years if the investment was part of
other gross income derived from a trade or
1.1411-10, which are effective for tax
a carryback or carryforward.
business that is (a) a passive activity or (b)
years beginning after 2013.
a trade or business of trading in financial
Application to Individuals
instruments or commodities. Additionally,
Who Must File
net investment income includes net gain
U.S. citizens and residents. Individuals
(to the extent taken into account in
Attach Form 8960 to your return if Form
who have for the tax year (a) modified
8960, line 17, is greater than zero
computing taxable income) attributable to
adjusted gross income (MAGI) that is over
(individuals) or line 21 is greater than zero
the disposition of property other than
an applicable threshold amount, and (b)
(estates and trusts).
property held in a trade or business that is
net investment income, must pay 3.8% of
not (a) a passive activity or (b) a trade or
the smaller of (a) or (b) as their NIIT.
Purpose of Form
business of trading in financial instruments
The applicable threshold amount is
or commodities. To arrive at net
Use Form 8960 to figure the amount of
based on your filing status:
investment income, the above items are
your Net Investment Income Tax (NIIT).
Married Filing Jointly or Qualifying
reduced by deductions allowed against
Widower with Dependent Child is
the income tax which are properly
allocable to those items of gross income
Controlled foreign corporation (CFC).
Married Filing Separately is $125,000,
or net gain. See section 1411(c) and
Generally, a CFC is any foreign
Regulations sections 1.1411-4 and
corporation if more than 50% of its voting
Single or Head of Household is
power or stock value is owned or
Passive foreign investment company
considered owned by U.S. shareholders
Nonresidents. The NIIT does not apply
(PFIC). Generally, a PFIC is any foreign
on any day during the tax year. Certain
to nonresident alien (NRA) individuals. If
corporation if at least 75% of its gross
insurance companies are considered
you are a U.S. citizen or resident married
income is passive income or an average
CFCs if more than 25% of their voting
to an NRA, your filing status will be
of at least 50% of its assets produce
power or stock value is owned or
married filing separately for purposes of
passive income or are held for the
considered owned by U.S. shareholders
determining your MAGI, net investment
production of passive income. See section
on any day during the tax year. See
income, and whether you are subject to
sections 953(c)(1)(B) and 957(a).
the NIIT. However, see information later
Qualified electing fund (QEF).
Excluded income. Excluded income
about certain elections to file jointly with
Generally, a QEF is a PFIC for which the
NRA spouses.
taxpayer has made an election under
Income excluded from gross income in
Dual-resident individual. If you are a
section 1295(b) and the PFIC complies
chapter 1 of the Internal Revenue Code
dual-resident individual, within the
with IRS requirements for determining
meaning of Regulations section
ordinary earnings and net capital gain.
Income not included in net investment
301.7701(b)-7(a)(1), generally you will be
See section 1295(a).
income, and
treated as a U.S. resident for purposes of
Gross income and net gain specifically
Section 1.1411-10(g) election. An
the NIIT. However, you will be treated as
excluded by section 1411, related
election made under Regulations section
an NRA for purposes of the NIIT if:
regulations, or other guidance published in
1.1411-10(g) (section 1.1411-10(g)
You determine you would be treated as
the Internal Revenue Bulletin.
election). See
Regulations Section
a resident of a foreign country for
Election, later.
Examples of excluded items are:
purposes of an income tax treaty between
the United States and that foreign country,
Section 1411 trade or business.
Unemployment compensation,
Generally, a trade or business that is
You elect to be treated as a resident of
Alaska Permanent Fund Dividends,
the foreign country for purposes of
either a passive activity for the taxpayer or
Jan 15, 2016
Cat. No. 53783S


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