Boldin estimates the Net Investment Income Tax (NIIT) in your plan using the interest, dividends, and capital gains from your investment accounts. Some income that can be subject to NIIT, such as rental income and non-qualified annuity income, is not included in Boldin’s NIIT calculation. If you have that kind of income, your plan may understate your NIIT.
What is the Net Investment Income Tax (NIIT)?
NIIT is a 3.8% federal tax on investment income for higher earners. It applies to the lesser of:
Your net investment income, or
The amount your modified adjusted gross income (MAGI) is over your filing status threshold
Single: $200,000
Married filing jointly: $250,000
These thresholds are not adjusted for inflation, so more households cross them over time.
Example: A married couple filing jointly has MAGI of $280,000 and $50,000 of net investment income. Their MAGI is $30,000 over the threshold. Since $30,000 is less than $50,000, NIIT applies to $30,000: $30,000 × 3.8% = $1,140.
What income does Boldin include in the NIIT calculation?
Interest
Qualified dividends
Capital gains when investments are sold (sale amount minus cost basis)
Capital gain distributions, based on the turnover rate you enter for each account
What income can be subject to NIIT but isn't included in Boldin's calculation?
Boldin does not include the following in its NIIT calculation, even though the IRS may apply NIIT to them:
Passive income, such as rental income and royalties
Gain on the sale of a home above the Section 121 exclusion ($250,000 single / $500,000 married filing jointly)
The taxable portion of non-qualified annuity income (workaround needed)
What income is not subject to NIIT?
Wages
Self-employment income
Social Security benefits
IRA, 401(k), 403(b), and pension distributions
Roth conversions
Tax-exempt municipal bond interest
Unemployment compensation
VA benefits
Alimony
Retirement account distributions and Roth conversions are not subject to NIIT, but they do raise your MAGI. A higher MAGI can push your other investment income above the NIIT threshold.
How do I enter income in Boldin that isn't modeled for NIIT?
You can enter any of the income above as Pension Income so it shows up in your plan. Boldin does not apply NIIT to Pension Income. You can set Pension Income to be taxed, untaxed, or taxed at the state level only.
For income that can be subject to NIIT (like rental or non-qualified annuity income): your income and taxable income will include it, but Boldin won't calculate NIIT on it.
For income that isn't subject to NIIT (like alimony): no NIIT applies either way. Choose "No" for taxes if you don't want to reflect federal or state taxes or "State only" for income that isn't federally taxable.
If you enter income as Pension Income, you can set it to be taxed, untaxed or taxed at the state level only. Use these options for income that isn't federally taxable, such as VA benefits, so it doesn't add to your federal taxable income.
How can I account for NIIT that Boldin doesn't calculate?
If you expect rental income, a large home sale gain, or non-qualified annuity income, and your MAGI is near or above the threshold, estimate the extra NIIT using IRS Form 8960 or with a tax professional. You can then add that amount as an expense in your Boldin plan so your cash flow reflects it.
Where can I see NIIT in my Boldin plan?
Insights > Taxes > Estimated Taxes shows your NIIT liability by year:
Insights > Income & Expenses > Estimated Expenses includes NIIT in your estimated tax payments.