The Affordable Care Act (“ACA”), otherwise known as Obamacare, has been in the headlines lately as Republicans work to replace the ACA or otherwise repeal it entirely. In recent days, efforts to replace the law have fallen through as certain Republican senators have pledged to oppose it. The debates surrounding the ACA have also brought the Net Investment Income Tax (“NIIT”) into the spotlight.
The NIIT is a 3.8% tax on the lesser of net investment income or the excess of modified adjusted gross income over a threshold amount. Net investment income includes interest, dividends, capital gains, rental income, royalties, non-qualified annuities and income from a trade or business of trading in financial instruments and commodities, and businesses that are passive with respect to the taxpayer.
According to UHY Partner, Chris Bryne, though the original Republican healthcare bill sought to repeal the NIIT, the latest iteration retained that tax, a decision stemming from worries over losing revenue sources and the optics of reducing taxes on high-income households while cutting benefits to working and middle class families. Now, with quick repeal of the ACA unlikely, it seems that the NIIT is staying for the foreseeable future.