As with all good tax questions, the answer is: It Depends! The new 3.8% tax on your Net Investment Income (NII) only kicks in at the higher adjusted gross income (AGI) levels. So unless you are in the top 3% of earners then the answer is no.

But if your AGI is over the threshold then you will possibly have to pay an additional 3.8% on the NII. The thresholds are $200,000 if unmarried, $250,000 if married filing jointly, and $125,000 if married filing separately.

Once you have determined that your income is over the threshold, you must determine what types of income applies. The IRS, of course, has a handy new form, the Form 8960, for just that calculation. The long and short of it boils down to this. You will pay the additional tax on the lesser of the amount of your NII or the amount of your income over the threshold. Read More