Question 1

What triggers the 3.8% Net Investment Income Tax and how can I reduce it?

Accepted Answer

The Net Investment Income Tax (NIIT) is an extra 3.8% levied on the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds a threshold — $200,000 single, $250,000 married filing jointly. These thresholds are set by statute and are not indexed for inflation, so more people cross them each year. Net investment income includes interest, dividends, capital gains, rental and passive income, and annuity income, but not wages, Social Security, or retirem

Question 2

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

Accepted 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 qual

Question 3

What major federal tax changes took effect for 2025 and 2026 that I should know about?

Accepted Answer

Several provisions from the 2017 tax law were scheduled to expire at the end of 2025, and legislation passed in 2025 addressed many of them, so the landscape has shifted. Watch for updates to the individual tax brackets and standard deduction, the state-and-local tax (SALT) deduction cap, the child tax credit, the estate and gift tax exemption, and the qualified business income (QBI) deduction. Standard deduction, contribution limits, and bracket thresholds are also adjusted annually for inflati

Question 4

How has the SALT deduction cap changed and how does it affect high-tax-state residents?

Accepted Answer

The 2017 tax law capped the federal deduction for state and local taxes (income or sales, plus property) at $10,000, which hit residents of high-tax states like California, New York and New Jersey hard. The 2025 tax law changed that: the cap is $40,000 for 2025 and $40,400 for 2026, increasing roughly 1% a year through 2029, then reverting to $10,000 in 2030 unless Congress extends it. It is not unlimited — above $505,000 of modified AGI in 2026 the cap phases down by 30 cents per dollar of exce

Question 5

What is a pass-through entity (PTE) tax election and can it save me SALT money?

Accepted Answer

Most states now offer a pass-through entity tax that lets partnerships and S-corporations pay state income tax at the business level, where it's fully deductible on the federal return, instead of passing it to owners who face the SALT cap on their personal returns ($40,400 in 2026, reverting to $10,000 from 2030). The owners then get a credit or income exclusion on their state return, so it's largely a mechanism to convert non-deductible personal SALT into deductible business expense. It can sav

Question 6

Are the higher standard deduction and tax brackets permanent or set to change again?

Accepted Answer

The larger standard deduction, lower bracket rates, and other individual provisions created by the 2017 tax law were originally temporary and slated to expire after 2025. Legislation in 2025 revisited these, so whether they're now permanent, extended, or modified depends on what was enacted — and the numbers themselves still adjust annually for inflation. The practical takeaway is not to assume this year's figures match last year's, and not to make long-term plans (like large Roth conversions or

Frequently asked questions