Form · Net investment income tax
Form 8960: the net investment income tax, line by line
Seventeen lines that add up investment income, subtract what is properly allocable to it, set the result against MAGI over the threshold, and take 3.8% of the smaller number. What each line holds for an American abroad.
By Danilson Ramos · Founder, Atamatax
Published June 2026 · Updated September 2026
Check it for your own income
Does the 3.8% reach your investment income?
Four banded answers, no figures typed, no email. The read says which side of the threshold you sit on and — if you paid tax abroad — what that credit can and cannot do.
Free, no account, nothing you answer leaves this page. Open the full NIIT Exposure Check
A banded screen for a US citizen or resident; Form 8960 settles the exact figure. Four answers give bands for net investment income and MAGI, and no read here nets a foreign tax credit against the 3.8% — the Code allows none.
Form 8960 is short and its arithmetic is simple. The difficulty for someone abroad is in what goes on each line — which of their foreign amounts count, how a locally exempt gain is treated, where the excluded salary comes back in — and in the one thing the form conspicuously lacks: a line for the foreign tax they have already paid.
Part I — investment income
| Line | What goes there | For an American abroad |
|---|---|---|
| 1 | Taxable interest | Every account, including a Livret A, a GIC or a savings account the local country exempts |
| 2 | Ordinary dividends | Form 1040 line 3b — the qualified dividends are inside this figure, not on top of it |
| 3 | Annuities | The taxable part of a non-qualified annuity; a payment from a listed US plan is excluded |
| 4a–4c | Rents, royalties, partnerships, S corporations, trusts; the non-§1411 business adjustment | Rent from a foreign property; a SCPI distribution; line 4b removes income from an active business |
| 5a–5d | Net gain or loss from disposition of property; the non-§1411 and partnership adjustments | Shares and funds sold anywhere; a property sold abroad; a net loss enters only to the §1211(b) limit |
| 6 | Adjustments for certain CFCs and PFICs | QEF inclusions with a (g) election; distributions of previously taxed QEF earnings without one |
| 7 | Other modifications | Rarely used by individuals |
| 8 | Total investment income | 1 + 2 + 3 + 4c + 5d + 6 + 7 |
Mark-to-market inclusions under §1296 and gains treated as excess distributions under §1291 are net gain and belong in line 5a (Reg. §1.1411-10(c)(2)). An excess distribution that is a dividend under §316 is line 2. The §1291 deferred tax and interest charge are tax, not income, and appear nowhere in Part I.
Part II — deductions properly allocable
| Line | What goes there | Note |
|---|---|---|
| 9a | Investment interest expense | The Form 4952 amount, to the extent allocable |
| 9b | State, local and foreign income tax | Only tax you itemise on Schedule A and that is allocable to the investment income — never tax you claim as a credit on Form 1116 |
| 9c | Miscellaneous investment expenses | As allowed under current law |
| 10 | Additional modifications | Including allowable amounts under Reg. §1.1411-4(f) |
| 11 | Total deductions and modifications | 9d + 10 |
Part III — the tax
| Line | Arithmetic |
|---|---|
| 12 | Net investment income: line 8 − line 11 |
| 13 | Modified adjusted gross income — AGI with the §911 exclusion added back |
| 14 | Threshold: $200,000 single / head of household · $250,000 joint / surviving spouse · $125,000 married filing separately |
| 15 | Line 13 − line 14; if zero or less, zero |
| 16 | The smaller of line 12 and line 15 |
| 17 | Line 16 × 3.8% — enter on Schedule 2 |
Line 13 is where the exclusion comes back. Under §1411(d) and Reg. §1.1411-2(c), MAGI is AGI increased by the amount excluded under §911(a)(1), net of the deductions and exclusions that §911(d)(6) disallowed because of it. Under Reg. §1.1411-10(e), it is also decreased by QEF inclusions for which no (g) election is in effect — the mirror of leaving them off line 6.
Two worked lines
A single filer in Paris. Salary $150,000, all excluded under §911. Dividends $30,000 from a CTO, French tax paid $9,000. AGI $30,000; line 13 MAGI $180,000; line 14 $200,000; line 15 zero; line 17 zero. No NIIT — the exclusion was added back and MAGI still sat under the line.
The same person with a $60,000 gain on shares. AGI $90,000; MAGI $240,000; line 15 $40,000; line 12 $90,000; line 16 $40,000; line 17 $1,520. The French tax of $9,000 goes on Form 1116 against the regular tax and reduces it; it does not appear on Form 8960 unless itemised on line 9b, and it reduces the $1,520 by nothing as a credit.
Who does not file it
- A nonresident alien — §1411(e)(1) — unless a §6013(g) or (h) election is in effect for the year.
- Anyone whose MAGI is at or under the threshold, whatever their investment income.
- Anyone with no net investment income, whatever their MAGI.
- A dual-status individual files it for the resident part of the year only, with the threshold not prorated.
Do these lines apply to you?
The free check reads your bands against the threshold and lays out what would sit on each part of the form.
Authorities cited
- IRS Form 8960 — About Form 8960 — Net Investment Income Tax (Individuals, Estates, and Trusts)
- Instructions for Form 8960 — Instructions for Form 8960 (2025) — thresholds by filing status, MAGI, lines 1–17, CFC/PFIC adjustments
- IRC §1411 — IRC §1411 — Net Investment Income Tax (3.8%)
- 26 CFR §1.1411-2 — 26 CFR §1.1411-2 — Application to individuals; modified adjusted gross income (the §911 add-back)
- 26 CFR §1.1411-4 — 26 CFR §1.1411-4 — Definition of net investment income; properly allocable deductions
- 26 CFR §1.1411-10 — 26 CFR §1.1411-10 — Controlled foreign corporations and passive foreign investment companies (QEF, mark-to-market and §1291 amounts in net investment income; the §1.1411-10(g) election)
- IRC §911 — IRC §911 — Foreign earned income exclusion + housing exclusion/deduction
- IRC §27 — IRC §27 — Taxes of foreign countries and possessions: credit allowed against the tax imposed by chapter 1 to the extent provided in §901
- IRS Form 1116 — About Form 1116 — Foreign Tax Credit (Individual, Estate, or Trust)
Primary sources (Cornell Legal Information Institute for the US Code and CFR; IRS.gov for forms, procedures, and treaty documents). This page is general information, not individualized tax or legal advice.
Atamatax provides tax preparation support and educational resources. This website does not constitute legal or tax advice.