Form 8960 - Net Investment income Tax

U.S. citizens living at home, U.S. expats and Green Card holders who have worldwide income above certain thresholds are required to pay additional taxes on their investment income.

Form 8960 calculates the additional tax - the Net Investment Income Tax (NIIT)

Thresholds For From 8690

The applicable threshold to file the form is based on your filing status and your worldwide income

1. Married Filing Jointly or Qualifying Widow(er) is $250,000

2. Maried Filing Seperately is $125,000

3. Single or Head of Household is $200,000

Net Investment Income

This includes interest, dividends, capital gains, annuities, rental profits and royalties.

Foreign tax credits (FTC) and Net Investment Income Tax

Unfortunately you can not use foreign tax credits against net investment income tax.

If you are an American citizen living overseas, you may be in a position where all your income is foreign income with foreign taxes deducted. For the federal tax, you can claim the foreign taxes to reduce or stop the U.S. tax. If you are over the NIIT threshold then you would still have NIIT to pay on your foreign investment income.

When To File

While you are living outside the United States as an expat, the filing deadline for the U.S. tax return is June 15 each year (extended to July 15 for 2020).

Form 8960 is filed with your main federal tax return, the form 1040, with the IRS.

Next Steps

If you have any questions, e.g. if you do qualify as a bona fide resident, feel free to contact one of our US expat accountants here