Page 5 - NAR-1077_Investment_Income_Tax_Brochure_8.5x11_r7.indd

This is a SEO version of NAR-1077_Investment_Income_Tax_Brochure_8.5x11_r7.indd. Click here to view full version

« Previous Page Table of Contents Next Page »
Rental Income: Income Sources Including Real Estate Investment Income
Hank has a “day job” from which he earns $85,000 a year. He owns several small apartment
units and receives gross rents of $130,000. He also has expenses related to that income.
Te tax applies as follows:
AGI Before Rents
$85,000
Gross Rents
$130,000
Expenses
(Including depreciation and debt service)
$110,000
Net Rents
$20,000
New AGI
$105,000
($85,000 + net rents)
Excess of AGI over $200,000
$0
Lesser Amount
(Taxable)
$0
Tax Due
$0
Even though Hank’s combined gross rents and day job earnings exceed $200,000,
he will not be subject to the 3.8% tax because investment income includes NET,
not gross, rents.
NOTE:
Capital Gains, Interest and Dividends: Securities
Harry and Sally have substantial income from their securities investments. Teir AGI before
including that income is $190,000. Teir investment income is listed below.
Te tax applies as follows:
Interest Income
(Bonds, CDs)
$60,000
Dividend Income
$75,000
Capital Gains
$10,000
Total Investment Income
$145,000
New AGI
$335,000
($190,000 + $145,000)
Excess of AGI over $250,000
$85,000
($335,000 – $250,000)
Lesser Amount
(Taxable)
$85,000
(AGI excess)
Tax Due
$3,230
($85,000 x 0.038)
Example 3
Example 4