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LearnFAQTax Optimization

Does the Net Investment Income Tax apply to the sale of my home or rental property?

Answer

It can. Gain on selling your primary home is subject to the 3.8% NIIT only to the extent it isn't covered by the home-sale exclusion (up to $250,000 single or $500,000 married), so most homeowners with modest gains owe nothing. But a large taxable gain above the exclusion, or the sale of a second home or investment property, counts as net investment income and can trigger NIIT if your MAGI exceeds the $200,000/$250,000 thresholds. Rental income is generally investment income too, unless you qualify as a real-estate professional materially participating in the activity. Because a property sale can spike your MAGI in one year, plan the timing, consider an installment sale to spread the gain, and offset with capital losses. A tax pro can confirm how the exclusion and NIIT interact for your situation.

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