The Net Investment Income Tax also known as NIIT tax is a federal tax imposed on some forms of investment income on individuals, estates, and trusts whose income surpasses certain limits. The NIIT which was enacted as a component of the Affordable Care Act is subject to a rate of 3.8 per cent on net investment income or the difference between the modified adjusted gross income and the threshold, whichever is less. It is applicable to income including interest, dividends and capital gains, rental income and passive earnings. The NIIT makes sure that the greater-income taxpayers will pay extra revenue so that the federal healthcare finance and other government programs could be funded.
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