The Net Investment Income Tax (NIIT) is a tax levied by the federal government on investment income, including rental income, capital gains, and passive business activity income, for taxpayers whose modified adjusted gross income exceeds certain thresholds.
How It Applies to Florida Landlords
As a Florida landlord, your rental income is typically classified as investment income. If your total income exceeds the IRS threshold ($200,000 for single filers or $250,000 for married couples filing jointly), you may owe the 3.8% NIIT on your passive rental profits. Determining whether your rental activity is 'passive' or 'active' (real estate professional status) is critical, as active business income is generally exempt from NIIT.
Key Takeaways
- The NIIT rate is 3.8% on net investment income.
- Applies to high-income earners above specific AGI thresholds.
- Real estate professional status can potentially exempt landlords from this tax.