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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
Gross Rents
(Including depreciation and debt service)
Net Rents
($85,000 + net rents)
Excess of AGI over $200,000
Lesser Amount
Tax Due
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.
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)
Dividend Income
Capital Gains
Total Investment Income
($190,000 + $145,000)
Excess of AGI over $250,000
($335,000 – $250,000)
Lesser Amount
(AGI excess)
Tax Due
($85,000 x 0.038)
Example 3
Example 4