Formulier 8960 Instructies | Instructies voor het invullen van formulieren (2024)

Instructies voor formulier 8960, Netto-investerings-inkomstenbelasting

Rev. 2023

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Department of the Treasury

Internal Revenue Service

2023

Instructions for Form 8960

Net Investment Income Tax—Individuals, Estates, and Trusts

Section references are to the Internal Revenue Code unless

otherwise noted.

Gross income and net gain specifically excluded by section

1411, related regulations, or other guidance published in the

Internal Revenue Bulletin.

Examples of excluded items are:

Future Developments

For the latest information about developments related to Form

8960 and its instructions, such as legislation enacted after they

were published, go to IRS.gov/Form8960.

Wages,

Unemployment compensation,

Alaska Permanent Fund Dividends,

Alimony,

Social security benefits,

Tax-exempt interest income,

Income from certain qualified retirement plan distributions,

General Instructions

Reminders

and

Income subject to self-employment taxes.

Charitable contribution deduction for electing small busi-

ness trusts (ESBTs).Line 18b of Form 8960 was updated to

reflect changes outlined in P. L. 115-97, section 13542, that

amended the way the S portion of an ESBT accounts for

charitable contribution deductions under section 170(b) instead

of section 641(c), effective January 1, 2018. See Line 18b

Deductions for Distributions of Net Investment Income and

Charitable Deductions.

Net investment income.Generally, net investment income

includes gross income from interest, dividends, annuities,

royalties, and rents, unless they’re derived from the ordinary

course of a trade or business that isn’t (a) a passive activity, or

(b) a trade or business of trading in financial instruments or

commodities. In addition, net investment income includes other

gross income derived from a trade or business that’s (a) a

passive activity, or (b) a trade or business of trading in financial

instruments or commodities. Additionally, net investment income

includes net gain (to the extent taken into account in computing

taxable income) attributable to the disposition of property other

than property held in a trade or business that’s not (a) a passive

activity, or (b) a trade or business of trading in financial

instruments or commodities. To arrive at net investment income,

the above items are reduced by deductions allowed against the

income tax that are properly allocable to those items of gross

income or net gain. See section 1411(c) and Regulations

sections 1.1411-4 and 1.1411-10(c).

Trade or business income subject to net investment in-

come tax (NIIT).Line 4a of Form 8960 was amended to bring

attention to certain income reported on Schedule C (Form 1040)

and Schedule E (Form 1040) that is subject to NIIT. This change

was made to the instructions for Form 8960 in tax year 2022 to

better reflect section 1411(c)(2).

These instructions are based mostly on Regulations sections

1.1411-1 through 1.1411-10.

Who Must File

Attach Form 8960 to your return if your modified adjusted gross

income (MAGI) is greater than the applicable threshold amount.

Passive foreign investment company (PFIC).Generally, a

PFIC is any foreign corporation if at least 75% of its gross

income is passive income or an average of at least 50% of its

assets produce passive income or are held for the production of

passive income. See section 1297(a).

Purpose of Form

Use Form 8960 to figure the amount of your Net Investment

Income Tax (NIIT).

Qualified electing fund (QEF).Generally, a QEF is a PFIC for

which the taxpayer has made an election under section 1295(b)

and the PFIC complies with IRS requirements for determining

ordinary earnings and net capital gain. See section 1295(a).

Definitions

Controlled foreign corporation (CFC).Generally, a CFC is

any foreign corporation if more than 50% of its voting power or

stock value is owned or considered owned by U.S. shareholders

(as defined in section 951(b)) on any day during the tax year.

Certain foreign insurance companies are considered CFCs if

more than 25% of their voting power or stock value is owned or

considered owned by U.S. shareholders (as defined in section

951(b)) on any day during the tax year. See section 957(a) and

(b). Additionally, certain foreign insurance companies with

related person insurance income may be CFCs. See section

953(c). A specified foreign corporation described in section

965(e)(1)(B) and Regulations section 1.965-1(f)(45)(i)(B) that is

not otherwise a CFC is treated as a CFC for purposes of

Regulations section 1.1411-10. See Regulations section

1.965-1(d).

Section 1.1411-10(g) election.An election made under

Regulations section 1.1411-10(g) (section 1.1411-10(g)

election). See Regulations Section 1.1411-10(g) Election, later.

Section 1411 trade or business.Generally, a trade or

business that’s either a passive activity for the taxpayer or is a

trade or business of trading in financial instruments or

commodities. See section 1411(c)(2) and Regulations section

1.1411-5(a).

Recordkeeping

For the NIIT, certain items of investment income and investment

expense receive different treatment than for the regular income

tax. Therefore, you need to keep all records and worksheets for

the items you need to include on Form 8960. Keep all records for

the entire life of the investment to show how you calculated

basis. You’ll need to know what you did in prior years if the

investment was part of a carryback or carryforward.

Excluded income.Excluded income means:

Income excluded from gross income in chapter 1 of the

Internal Revenue Code;

Income not included in net investment income; and

Dec 8, 2023

Cat. No. 53783S

check the appropriate checkbox near the top of Form 8960, Part

I.

Application to Individuals

U.S. citizens and residents.Individuals who have for the tax

year (a) MAGI that’s over an applicable threshold amount, and

(b) net investment income, must pay 3.8% of the smaller of (a) or

(b) as their NIIT.

Once you make either election, its duration and termination

are governed by sections 6013(g) and 6013(h), respectively, and

related regulations.

The applicable threshold amount is based on your filing

You can make either election on an amended return only if the

tax year for which you’re making the election, and all tax years

affected by the election, aren’t closed by the period of limitations

on assessment under section 6501.

status.

Married Filing Jointly or Qualifying Surviving Spouse is

$250,000.

Married Filing Separately is $125,000.

Single or Head of Household is $200,000.

If you elect to apply a section 6013(g) election for NIIT

purposes and later determine that you didn’t meet the criteria for

doing so in that tax year, your election for NIIT purposes will have

no effect that year and for all future years. However, if, in a later

year, you meet the criteria to elect to apply your section 6013(g)

election for NIIT purposes, you’ll be treated as though you did

elect to apply your section 6013(g) election in that later year

unless you file (or amend) your return for that later year to report

your NIIT without the election for NIIT purposes.

Nonresidents. The NIIT doesn’t apply to nonresident alien

(NRA) individuals. If you’re a U.S. citizen or resident married to

an NRA, your filing status will be married filing separately for

purposes of determining your MAGI, net investment income, and

whether you’re subject to the NIIT. However, see information,

later, about certain elections to file jointly with NRA spouses.

Dual-resident individual.If you’re a dual-resident individual,

within the meaning of Regulations section 301.7701(b)-7(a)(1),

you’ll generally be treated as a U.S. resident for purposes of the

NIIT. However, you’ll be treated as an NRA for purposes of the

NIIT if:

Application to Estates and Trusts

Domestic estates and trusts.The NIIT applies to estates and

trusts that have undistributed net investment income and

adjusted gross income (AGI) in excess of the threshold amount.

The NIIT is 3.8% of the lesser of:

You determine you would be treated as a resident of a foreign

country for purposes of an income tax treaty between the United

States and that foreign country;

The undistributed net investment income for the tax year; or

The excess, if any, of AGI (as defined in section 67(e)) over

You elect to be treated as a resident of the foreign country for

purposes of computing your U.S. income tax liability; and

the applicable threshold amount.

You file Form 1040-NR, U.S. Nonresident Alien Income Tax

Return, and Form 8833, Treaty-Based Return Position

Disclosure Under Section 6114 or 7701(b), as provided in

Regulations section 301.7701(b)-7(b).

The applicable threshold amount is the dollar amount at

which the highest tax bracket in section 1(e) begins for the tax

year. See the instructions for Form 1041, Schedule G, line 1a,

and the instructions for Form 1041-QFT, line 12, for the dollar

amount at which the highest tax bracket begins for the tax year.

Dual-status individual.If you were a dual-status

individual—that is, an individual who was a resident of the United

States for part of the year and an NRA for the other part of the

year—you’re subject to the NIIT only for the portion of the year

you were a U.S. resident. The relevant threshold amount isn’t

reduced or prorated for a dual-status individual.

Exception for certain domestic trusts.The following trusts

aren’t subject to the NIIT.

Trusts that are exempt from income taxes imposed by subtitle

A of the Internal Revenue Code.

If you were a U.S. resident on the last day of the tax year, file

Form 1040 or 1040-SR and attach a statement showing your

income for the part of the year you were a nonresident. You can

use Form 1040-NR as the statement.

If you were a nonresident on the last day of the tax year, file

Form 1040-NR and attach a statement showing your income for

the part of the year you were a U.S. resident. You can use Form

1040 or 1040-SR as the statement.

1. Charitabletrusts and qualified retirement plan trusts

exempt from tax under section 501.

2. CharitableRemainder Trusts exempt from tax under

section 664.

A trust or decedent's estate in which all of the unexpired

interests are devoted to one or more of the purposes described

in section 170(c)(2)(B).

Trusts that are classified as “grantor trusts” under sections

671–679.

For more information, see the Instructions for Form 1040-NR

Electing Alaska Native Settlement Funds (described in

and Pub. 519, U.S. Tax Guide for Aliens.

section 646).

Perpetual Care (Cemetery) Trusts (described in section

Election To File Jointly With Nonresident

Spouse—Section 6013(g) or 6013(h)

642(i)).

Trusts that aren’t classified as “trusts” for federal income tax

If you and your spouse elect to file a joint return under section:

purposes. For example:

6013(g) (where an NRA is married to a U.S. citizen or resident

1. Realestate investment trusts, and

2. Commontrust funds.

at the end of the tax year); or

6013(h) (where at least one spouse was an NRA at the

beginning of the tax year, but is a U.S. citizen or resident married

to a U.S. citizen or resident at the end of the tax year),

Special computational rules for qualified funeral trusts

(QFTs). The NIIT applies to the QFT (as defined in section 685)

by treating each beneficiary's interest in that beneficiary's

contract as a separate trust. Complete one consolidated Form

8960 for all beneficiary contracts subject to NIIT.

you can also elect to apply the joint return election for NIIT

purposes. If you made a section 6013(g) or 6013(h) election, but

don’t elect to apply the joint return election for NIIT purposes,

then, for NIIT purposes, you’ll file as married filing separately.

If a QFT has one or more beneficiary contracts that have net

To make either election for NIIT purposes, use your combined

items of income, gain, loss, and deduction from your joint return

to figure your net investment income and MAGI; use the married

filing jointly return applicable threshold amount ($250,000); and

investment income in excess of the threshold amount:

Complete Form 8960, lines 1–12, using only the sum of the

net investment income of the beneficiary contracts that have net

investment income in excess of the threshold amount; and

On line 19b:

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Instructions for Form 8960 (2023)

1. Insertthe number of beneficiary contracts that have net

investment income in excess of the threshold amount next to the

entry on the line, and

2. Multiplythe number of beneficiary contracts that have net

investment income in excess of the threshold amount by the

threshold amount for the year and enter that amount on line 19b.

Note. The NIIT doesn’t apply directly to foreign estates or

foreign trusts.

Passive Activity

General Rules

Net investment income generally includes income and gain from

passive activities. A passive activity for purposes of net

investment income has the same meaning as under section 469.

A passive activity includes any trade or business in which you

don’t materially participate. A passive activity also includes any

rental activity, regardless of whether you materially participate.

There are limited exceptions for rentals. See the discussion on

rentals, later. For more details on passive activities, see the

Instructions for Form 8582, Passive Activity Loss Limitations, and

Pub. 925, Passive Activity and At-Risk Rules.

Example. For 2023, a QFT has a beneficiary contract with

$16,000 of interest income and another beneficiary contract with

$21,000 of dividend income. Neither contract has any properly

allocable deductions. The threshold amount for the 2023 tax

year is $14,450. Therefore, the QFT has two beneficiary

contracts with net investment income in excess of the threshold

amount for the year.

The QFT will report $16,000 on line 1 (interest) and $21,000

on line 2 (dividends). Lines 12, 18a, and 19 would each be

$37,000 ($16,000 plus $21,000). Enter “2” on the dotted line at

the end of line 19b and enter $28,900 ($14,450 × 2) on the entry

line for 19b. Lines 19c and 20 will be $8,100 ($37,000 less

$28,900). On line 21, enter the NIIT liability of $307.80 ($8,100 ×

3.8% (0.038)).

Trade or Business Activities

The definition of trade or business for NIIT purposes is limited to

a trade or business within the meaning of section 162. This is

more restrictive than the definition of a trade or business activity

for purposes of the passive activity loss rules. For example,

under the passive activity loss rules, a trade or business includes

any activity conducted in anticipation of the commencement of a

trade or business and any activity involving research or

Special computational rules for electing small business

trusts (ESBTs).The NIIT has special computational rules for

ESBTs. In general, ESBTs compute their NIIT in 3 steps.

1. TheESBT separately calculates the undistributed net

investment income of the S portion and non-S portion according

to the general rules for trusts under chapter 1 of the Code, and

then combines the undistributed net investment income of the S

portion and the non-S portion. In the case of an ESBT that has

an S portion and a non-S portion, complete lines 1–11 of Form

8960 using the items from the non-S portion, and add

undistributed net investment income of the S portion to net

investment income on line 7.

2. TheESBT determines its AGI, solely for purposes of NIIT,

by adding the net income or net loss from the S portion to the

AGI of the non-S portion as a single item of income or loss. See

the instructions for line 19a for more information.

experimentation. In some cases, income from activities that

aren’t passive activities under section 469 will be included in net

investment income because the activity doesn’t rise to the level

of a trade or business within the meaning of section 162. The

activity must be a trade or business within the meaning of

section 162 and be nonpassive for purposes of section 469

before the income is excluded from the NIIT. If you own an

interest in a pass-through entity, the determination of whether

that’s a trade or business is made at that entity's level.

Real Estate Professionals

If you’re a real estate professional for purposes of section 469(c)

(7), your rental income or loss won’t be passive if you materially

participated in the rental real estate activity with certain

restrictions. See Safe Harbor for Real Estate Professionals.

3. Todetermine whether the ESBT is subject to NIIT, the

ESBT compares the combined undistributed net investment

income with the excess of its AGI over the section 1(e) threshold.

However, your rental income is included in net investment

income if the income isn’t derived in the ordinary course of a

trade or business. Qualifying as a real estate professional

doesn’t necessarily mean you’re engaged in a trade or business

with respect to the rental real estate activities. If your rental real

estate activity isn’t a section 162 trade or business or you don’t

materially participate in the rental real estate activities, the rental

income will be included in NIIT.

For an ESBT with only S corporation income (no non-S

portion), complete Form 8960 using the items from the S

portion. For ESBTs with an S portion and a non-S

TIP

portion, use Form 8960 as a worksheet for calculating the

amounts to enter on line 7 and line 19a. On the S portion's Form

8960 worksheet, enter the S portion's net investment income on

line 7 of the trust's Form 8960 and combine line 19a of the Form

8960 worksheet with the non-S portion's AGI to arrive at the

amount on line 19a.

For additional information on real estate professionals, see

section 469(c)(7) and Pub. 925.

See Regulations section 1.1411-3(c) for more details and

examples.

Safe Harbor for Real Estate Professionals

Special computational rules for bankruptcy estates of an

individual. A bankruptcy estate of an individual debtor is

treated as an individual for purposes of the NIIT. Regardless of

the actual marital status of the debtor, the applicable threshold

for purposes of determining the NIIT is the amount applicable for

a married person filing separately.

You qualify for the safe harbor if you’re a real estate professional

for purposes of section 469 and you:

Participate in each rental real estate activity for more than 500

hours during the tax year, or

Participated in a rental real estate activity for more than 500

hours in any 5 tax years (whether or not consecutive) during the

10 tax years immediately prior to this tax year.

Distributions from foreign estates and foreign trusts.If

you’re a U.S. person who receives a distribution of income from a

foreign estate or foreign trust, you must generally include the

distribution in your net investment income calculation to the

extent that the income is included in your AGI for regular income

tax purposes. However, you don’t need to include any

distributions of accumulated income that you receive from a

foreign trust.

If you qualify, your gross rental income from your rental real

estate activity is treated as though derived in the ordinary course

of a trade or business and isn’t included in your net investment

income. If you qualify in the year you dispose of the property

used in the rental real estate activity, the amount of gain or loss

from the disposition is also deemed to be derived from property

used in the ordinary course of a trade or business and isn’t

included in your net investment income.

-3-

Instructions for Form 8960 (2023)

Note. For real estate professionals with a Regulations section

1.469-9(g) election in effect, all of your rental real estate

activities constitute a single activity for purposes of applying the

500-hour test described in Safe Harbor for Real Estate

Professionals above.

income (before taking into account any suspended losses). Any

suspended passive losses that are allowed by reason of section

469(g) are allowed as additional properly allocable deductions.

Economic Grouping

You can treat one or more trade or business activities, or rental

activities, as a single activity if those activities form an

appropriate economic unit for measuring gain or loss under the

passive activity loss rules. For additional information on passive

activity grouping rules, see Pub. 925.

Note. If you're a real estate professional under section 469(c)

(7), but you’re unable to satisfy the qualifications for the safe

harbor, you’re not precluded from establishing that the gross

income and gain or loss from the disposition of property

associated with your rental real estate activity isn’t included in

net investment income.

Regrouping rules.The passive activity grouping rules

determine the scope of your trade or business and whether that

trade or business is a passive activity for purposes of the NIIT.

The proper grouping of a rental activity with a trade or business

activity won’t generally convert any gross income from rents into

gross income derived from a trade or business.

Generally, you may not regroup activities unless your

grouping was clearly inappropriate when originally made, or has

become clearly inappropriate because of changed facts and

circ*mstances.

However, under the NIIT “fresh start” election, you may

regroup for the first tax year you’re subject to the NIIT (without

the effect of the regrouping). You may regroup only once under

this election and that regrouping will apply to the tax year for

which you regroup and all future tax years. If you’re subject to the

NIIT for 2013 and you don’t regroup, you may make the election

for the first tax year beginning after 2013 that you’re subject to

the NIIT.

You may regroup on an amended return, but only if you

weren’t subject to the NIIT on your original return (or previously

amended return), and if, because of a change to the original

return, you owe NIIT for the year. For additional rules regarding

regrouping on amended returns, see Regulations section

1.469-11(b)(3)(iv)(C).

Special Rules for Certain Rental Income

For income tax purposes, Regulations section 1.469-2(f)(6)

generally recharacterizes what would otherwise be passive

rental income from a taxpayer's property as nonpassive where

the taxpayer rents the property for use in a trade or business in

which the taxpayer materially participates. Similarly, for income

tax purposes, a rental activity that’s properly grouped with a

trade or business activity in which the taxpayer materially

participates under Regulations section 1.469-4(d)(1) is a

nonpassive activity. For purposes of calculating your net

investment income, the gross rental income in both of these

situations is treated as though it’s derived in the ordinary course

of a trade or business. Further, upon the disposition of the assets

associated with the rental activity, any gain or loss is also treated

as gain or loss attributable to the disposition of property held in a

nonpassive trade or business and not included in your net

investment income. For these purposes, the nonpassive trade or

business can’t be a business trading in financial instruments or

commodities.

Treatment of Former Passive Activities

A former passive activity is any activity that was a passive activity

in a prior tax year but isn’t a passive activity in the current year. A

prior tax year's unallowed loss from a former passive activity is

allowed to the extent of current year income from the activity

under section 469(f)(1)(A). For purposes of determining your net

investment income, suspended losses from former passive

activities are allowed as a properly allocable deduction, but only

to the extent the net income or net gain from the former passive

activity is included in your net investment income. Any remaining

suspended losses from the former passive activity are allowed

as a properly allocable deduction, but only to the extent the net

income or net gain from other passive activities is included in

your net investment income. For more information, see

Disclosure requirements.Regroupings under the NIIT “fresh

start” are subject to the disclosure requirements of Rev. Proc.

2010-13.

Disposition of Partnership Interest or

S Corporation Stock

In general, an interest in a partnership or S corporation isn’t

property held for use in a trade or business and, therefore, gain

or loss from the sale of a partnership interest or S corporation

stock is included in your net investment income.

Regulations section 1.1411-4(g)(8) and examples.

Adjustment

The amount of the gain or loss from the disposition for regular

income tax purposes is included on Form 8960, line 5a, as a

gain or loss. If you materially participated (as defined under the

passive activity loss rules) in a trade or business activity of the

partnership or S corporation (or one of its subsidiaries) and that

trade or business activity isn’t the trade or business of trading in

financial instruments or securities, then you must calculate the

adjustment to report on line 5c. The adjustment described below

only applies to dispositions of equity interests in partnerships

and stock in S corporations and doesn’t apply to gain or loss

recognized on, for example, indebtedness owed to the taxpayer

by a partnership or S corporation.

Disposition of Entire Interest

If you disposed of your entire interest in a passive activity or a

former passive activity to an unrelated person in a fully taxable

transaction, your losses allocable to the activity for that year

aren’t limited by the passive activity loss rules for income tax

purposes. A fully taxable transaction is a transaction in which

you recognize all realized gain or loss. For purposes of

calculating your net investment income, these losses may be

properly allocable deductions, depending on the underlying

character and origin of the losses.

Note. If you dispose of an activity that’s always been a passive

activity, the suspended passive losses from that activity are

allowed in full as a properly allocable deduction.

For more information on how to calculate the adjustment to

report on line 5c, see Proposed Regulations section 1.1411-7.

Note. If you dispose of an activity that’s a former passive

activity, any suspended passive losses allowed in the year of

disposition by reason of section 469(f)(1)(A) are included as

properly allocable deductions, but only to the extent the gain on

the disposition of the activity is included in net investment

Note. If the tax basis of the interest in the partnership or S

corporation for NIIT purposes is different than for regular income

tax purposes due to certain adjustments associated with income

from CFCs or QEFs, the amount of gain or loss may exceed the

amount reported for regular income tax purposes.

-4-

Instructions for Form 8960 (2023)

Example. If, in 2023, a single individual acquires stock in a

QEF, has a QEF inclusion of $5,000, and has MAGI of $150,000,

the individual wouldn’t have to make a section 1.1411-10(g)

election for 2023 because section 1411 isn’t applicable. If, in

2024, the individual has MAGI in excess of $200,000, and the

individual would like to take QEF inclusions into account for

purposes of section 1411 in the same manner and in the same

tax year as those amounts are taken into account for Code

chapter 1 purposes, the individual must make the section

1.1411-10(g) election for 2024 in the time and manner described

in Regulations section 1.1411-10(g).

Required statements.Attach a statement to your return for the

year of disposition. Your statement must include:

The name and taxpayer identification number of the

partnership or S corporation of which the interest was

transferred,

The amount of the transferor's gain or loss on the disposition

of the interest for regular income tax purposes included on

line 5a,

The information provided by the partnership or S corporation

to the transferor relating to the disposition (if any), and

The amount of adjustment to gain or loss due to basis

adjustments attributable to ownership in certain CFCs and

QEFs.

Content requirements of election.If you’re making or made

the election in a prior year, you must check the checkbox for

“Regulations section 1.1411-10(g) election” on the Form 8960

filed with your original or amended return. In addition, you must

attach a statement to your return, which includes the following.

Deferred recognition sales (installment sales and private

annuities). If you disposed of a partnership interest or S

corporation stock in an installment sale transaction to which

section 453 applies, you need to calculate your adjustment to net

gain in the year of the disposition, even if the disposition

occurred prior to 2013. The difference between the amount

reported for regular income tax and NIIT will be taken into

account when each payment is received. You must attach the

statement described above to your return in the first year you’re

subject to NIIT. In subsequent years, attach a statement to your

return that provides “Adjustment relates to a deferred recognition

sale first reported on line 5c of the (enter year) return.

Your name and social security number (individuals) or

employer identification number (EIN) (estates and trusts).

The following information for each CFC or QEF for which an

election is made.

1. Thename of the CFC or QEF.

2. Eitherthe EIN of the CFC or QEF, or, if the CFC or QEF

doesn’t have an EIN, the reference ID number of the CFC or

QEF.

In addition, list separately each CFC or QEF for which an

election is being made for the first time with this return and

include on the statement a declaration that you elect under

Regulations section 1.1411-10(g) to apply the rules in section

1.1411-10(g).

Regulations Section 1.1411-10(g)

Election

In general, you may make the election provided in Regulations

section 1.1411-10(g) if you own stock of a CFC or QEF. If a

section 1.1411-10(g) election is in effect for stock of a CFC or

QEF, generally, the amounts you include in income for regular

income tax purposes under sections 951, 951A, and 1293 from

the stock of the CFC or QEF are included in net investment

income, and distributions from the stock of the CFC or QEF,

described in section 959(d) or 1293(c), are excluded from net

investment income.

Special Rule for Traders in Financial

Instruments or Commodities

Gains and losses from your trade or business of trading in

financial instruments or commodities aren’t subject to

self-employment taxes. However, interest expense and other

investment expenses are deducted by a trader on Schedule C

(Form 1040), Profit or Loss From Business, if the expenses are

from the trading business. A special rule may apply to a trader in

financial instruments or commodities to reduce net investment

income. The trader's interest and other investment expenses, to

the extent the expenses aren’t used to reduce the trader's

self-employment income, may be deductible for NIIT.

Your election applies only to the specific stock of the CFC or

QEF for which it’s made and stock of the CFC or QEF that you

subsequently acquire. If you own a CFC or QEF through certain

domestic pass-through entities, such as a domestic partnership,

the entity may make the election for the stock of the CFC or QEF

and you’ll be considered as having made the election with

respect to the stock of the CFC or QEF owned or subsequently

acquired by the pass-through entity. The election by the

pass-through entity applies only to stock of the CFC or QEF held

or subsequently acquired directly or indirectly by the

Specific Instructions

Part I—Investment Income

Elections for Investment Income

If you’re making the section 6013(g) or 6013(h) election (see

Election To File Jointly With Nonresident Spouse—Section

6013(g) or 6013(h), earlier), check the corresponding checkbox.

pass-through entity. The pass-through entity's election doesn’t

apply to any stock of the CFC or QEF that you personally hold or

subsequently acquire. If the entity doesn’t make the election, you

may make the election for the stock of the CFC or QEF owned

through the entity.

If you’re making or have made a section 1.1411-10(g) election

(see Regulations Section 1.1411-10(g) Election, earlier), check

the corresponding checkbox and attach a statement to your

return, as described earlier under Content requirements of

election.

Timing of election.Your election applies to the tax year for

which it’s made and later tax years, and applies to all interests in

the CFC or QEF that you later acquire. You can’t revoke the

election. In general, the election must be made no later than the

first tax year beginning after 2013, in which you include an

amount in income for regular income tax purposes under section

951(a), 951A, or 1293(a) for the stock of the CFC or QEF, and

are subject to NIIT or would be subject to NIIT if you made the

election for the stock of the CFC or QEF. The election may be

made for a tax year beginning before 2014. The election can be

made on an original or an amended return, provided that the tax

year for which the election is made, and all tax years affected by

the election, aren’t closed by the period of limitations on

assessment under section 6501. For more information, see

Regulations section 1.1411-10(g).

Line 1—Taxable Interest

Enter the amount of taxable interest received. Include the

following amount from your return.

Form 1040 or 1040-SR, line 2b.

Form 1041, line 1.

Form 1041-QFT, line 1a.

Form 1040-NR, taxable interest received for period of U.S.

residency shown on attached statement.

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Instructions for Form 8960 (2023)

See Special computational rules for qualified funeral trusts

(QFTs) and Dual-status individual, earlier.

Line 4a—Income From Trades/Businesses, Rental

Real Estate, Royalties, Partnerships, S

Corporations, and Trusts

Adjustments to interest.Interest income earned in the

ordinary course of your non-section 1411 trade or business is

excluded from net investment income. If this type of interest

income is included on line 1, use line 7 to adjust your net

investment income.

If line 1 includes self-charged interest income received from a

partnership or S corporation that’s a nonpassive activity (other

than a trade or business of trading in financial instruments or

commodities), see Line 7—Other Modifications to Investment

Income, later, for a possible adjustment to net investment

income.

Enter the following amount from your properly completed return.

Schedule 1 (Form 1040), line 3.

Schedule 1 (Form 1040), line 5.

Form 1041, line 3.

Form 1041, line 5.

Form 1041-QFT, the portion of line 4 that’s income and loss

that properly would be reported by a trust filing Form 1041 on

Form 1041, line 5.

Form 1040-NR, the amount properly reported on the

attachment to your Form 1040-NR representing the amount that

you would properly include on Schedule 1 (Form 1040), line 5, if

you were filing Form 1040 or 1040-SR and including income and

loss only for your period of U.S. residency.

Line 2—Ordinary Dividends

Enter the amount of ordinary dividends received. Include the

following amount from your return.

Form 1040 or 1040-SR, line 3b.

Form 1041, line 2a.

See Special computational rules for qualified funeral trusts

(QFTs) and Dual-status individual, earlier.

Form 1041-QFT, line 2a.

Note. Income reported on Schedule 1 (Form 1040), line 3, and

Schedule 1 (Form 1040), line 5, include both passive and

nonpassive income, and are added to line 4a of Form 8960.

Nonpassive income included on Schedule C (Form 1040) and

Schedule E (Form 1040), Supplemental Income and Loss, is

removed (as a negative) on line 4b, so that only passive income

from Schedule C (Form 1040), and Schedule E (Form 1040)

remain on line 4c.

Form 1040-NR, ordinary dividends received for period of U.S.

residency shown on attached statement.

See Special computational rules for qualified funeral trusts

(QFTs) and Dual-status individual, earlier.

Adjustments to dividends.If line 2 includes dividends from

employer securities held in an employee stock ownership plan

(ESOP) that are deductible under section 404(k) or Alaska

Permanent Fund Dividends, include those amounts as negative

modifications on line 7. See Line 7—Other Modifications to

Investment Income, later.

Line 4b—Adjustment for Net Income or Loss

Derived in the Ordinary Course of a Non-Section

1411 Trade or Business

Line 3—Annuities

Use line 4b to adjust the amounts included on line 4a, for gains

and losses that are excluded from the calculation of net

investment income. Enter the amount of gains (as a negative

number) and losses (as a positive number). Enter the net

positive or net negative amount for the following items included

on line 4a that aren’t included in determining net investment

income.

Enter the gross income from all annuities, except annuities paid

from the following.

Section 401—Qualified pension, profit-sharing, and stock

bonus plans.

Section 403(a)—Qualified annuity plans purchased by an

employer for an employee.

Section 403(b)—Annuities purchased by public schools or

Net income or loss from a section 162 trade or business that’s

section 501(c)(3) tax-exempt organizations.

Section 408—Individual retirement accounts (IRAs) or

not a passive activity and isn’t engaged in a trade or business of

trading financial instruments or commodities.

annuities.

Net income or loss from a section 1411 trade or business

Section 408A—Roth IRAs.

that’s taken into account in determining self-employment

income.

Section 457(b)—Deferred compensation plans of a state and

local government and tax-exempt organization.

Royalties derived in the ordinary course of a section 162 trade

Amounts paid in consideration for services (for example,

or business that’s not a passive activity.

distributions from a foreign retirement plan that are paid in the

form of an annuity and include investment income that was

earned by the retirement plan).

Passive losses of a former passive activity that are allowed as

a deduction in the current year under section 469(f)(1)(A).

How your annuities are reported to you.Net investment

income from annuities is reported to a recipient on Form 1099-R,

Distributions From Pensions, Annuities, Retirement or

Profit-Sharing Plans, IRAs, Insurance Contracts, etc. However,

the amount reported on Form 1099-R may also include annuity

payments from retirement plans that are exempt from NIIT.

Amounts subject to NIIT should be identified with code “D” in

box 7. If code “D” is shown in box 7 of Form 1099-R, include on

Form 8960, line 3, the taxable amount reported in box 2a of Form

1099-R. However, if the payor checks box 2b indicating the

taxable amount can’t be determined, you may need to calculate

the taxable portion of your distribution. See Pub. 939, General

Rule for Pensions and Annuities, and Pub. 575, Pension and

Annuity Income, for details.

In addition, use line 4b to adjust for certain types of

nonpassive rental income or loss derived in the ordinary course

of a section 162 trade or business. For example, line 4b includes

the following items.

Nonpassive net rental income or loss of a real estate

professional where the rental activity rises to a section 162 trade

or business.

Net rental income or loss that’s a nonpassive activity because

it was grouped with a trade or business under Regulations

section 1.469-4(d)(1). See Special Rules for Certain Rental

Income, earlier.

Other rental income or loss from a section 162 trade or

business reported on Schedule K-1 (Form 1065), Partner's

Share of Income, Deductions, Credits, etc., line 3, from a

partnership, or Schedule K-1 (Form 1120-S), Shareholder's

-6-

Instructions for Form 8960 (2023)

Share of Income, Deductions, Credits, etc., line 3, from an S

corporation, where the activity isn’t a passive activity.

Line 5b—Net Gain or Loss From Disposition of

Property That Isn’t Subject to Net Investment

Income Tax

Net income that’s been recharacterized as not from a passive

activity under the section 469 passive loss rules and is derived in

the ordinary course of a section 162 trade or business. For

example:

1. Netrental income or loss from a rental that meets an

exception under Regulations section 1.469-1T(e)(3)(ii), the

activity rises to a section 162 trade or business, and you

materially participated in the activity; or

Use line 5b to adjust the amounts included on line 5a for gains

and losses that are excluded from the calculation of net

investment income. Enter the amount of gains (as a negative

number) and losses (as a positive number) included on line 5a

that are excluded from net investment income. For example,

line 5b will include amounts such as the following.

2. Netincome from property rented to a nonpassive activity.

Gain or loss from the sale of property held in a non-section

See Special Rules for Certain Rental Income, earlier.

1411 trade or business.

1. However,if the losses are attributable to formerly

suspended passive losses of the non-section 1411 trade or

business, such gains and losses are excluded from net

investment income to the extent the nonpassive income from the

non-section 1411 trade or business is excluded from net

investment income. See Regulations section 1.1411-4(g)(8) for

more information and examples.

2. Gainor loss from the sale of property held in a

non-section 1411 trade or business doesn’t include substantially

appreciated property that’s recharacterized as portfolio income.

See Substantially appreciated property, later.

Note. Any income from an estate or trust reported on Part III of

Schedule E (Form 1040) that excluded net investment income is

taken into account on line 7. Don’t report those adjustments on

line 4b.

For line 4b adjustments, enter net positive amounts as a

negative adjustment and enter net negative amounts as

!

CAUTION

a positive adjustment.

Lines 5a–5d—Gains and Losses on the

Dispositions of Property

Gain attributable to net unrealized appreciation (NUA) in

Generally, net gain from the disposition of property not used in a

trade or business and net gain or loss from the disposition of

property held in a section 1411 trade or business is included in

net investment income if included in taxable income.

employer securities held by a qualified plan. See Net gain

attributable to Net Unrealized Appreciation (NUA) in employer

securities held by a qualified plan, later.

Adjustments to your capital loss carryforwards for items of

excluded loss. See Adjustments to your capital loss

carryforwards, later.

Gains and losses that aren’t taken into account in computing

taxable income aren’t taken into account in computing net

investment income. For example, gain that isn’t taxable by

reason of section 121 (sale of a principal residence) or section

1031 (like-kind exchanges) isn’t included in net investment

income.

Substantially appreciated property.If an interest in property

is substantially appreciated at the time of disposition (fair market

value exceeds 120% of the adjusted basis), any gain from the

disposition is treated as nonpassive, unless the interest in

property was used in a passive activity for either:

See Lines 5a–5d—Net Gains and Losses Worksheet, in

these instructions, for assistance in calculating net gain or loss

includible in net investment income.

1. 20%of the total period during which you held the interest

in property; or

2. Theentire 2-year period ending on the date of the

disposition.

See Regulations section 1.469-2(c)(2). The recharacterized

gain may be taken into account under section 1411(c)(1)(A)(iii) if

the gain is attributable to the disposition of property and

recharacterized as portfolio income.

Line 5a—Net Gain or Loss From Disposition of

Property

Calculate and enter the amount of net gain or loss from the

disposition of property by combining the following amounts from

your properly completed return.

Net gain attributable to Net Unrealized Appreciation (NUA)

in employer securities held by a qualified plan.Any gain

attributable to NUA (within the meaning of section 402(e)(4)) that

you realize on a disposition of employer securities held by a

qualified plan is a distribution within the meaning of section

1411(c)(5) and isn’t included in net investment income. However,

any gain realized on a disposition of employer securities

attributable to appreciation in the value of your employer

securities after the distribution from a qualified plan isn’t a

distribution within the meaning of section 1411(c)(5) and is

included in net investment income.

Form 1040 or 1040-SR, line 7, and Schedule 1 (Form 1040),

line 4.

Form 1041, lines 4 and 7.

Form 1041-QFT, line 3, and the portion of line 4 attributed to

ordinary gain/(loss).

Form 1040-NR, the amounts properly reported on the

attachment to your Form 1040-NR representing the amounts that

you would enter on Form 1040 or 1040-SR, line 7, and Schedule

1 (Form 1040), line 4, if you were filing Form 1040 or 1040-SR

and including net gain or loss only for your period of U.S.

residency.

Shareholders of CFCs and QEFs without a section

1.1411-10(g) election.In the case of a QEF (other than a QEF

held in a section 1411 trade or business) for which a section

1.1411-10(g) election isn’t in effect, enter the amount treated as

long-term capital gain for regular income tax purposes under

section 1293(a)(1)(B).

See Special computational rules for qualified funeral trusts

(QFTs) and Dual-status individual, earlier.

Also, in the case of a disposition of a CFC or QEF (other than

a CFC or QEF held in a section 1411 trade or business) for

which a section 1.1411-10(g) election isn’t in effect, enter the

increase or decrease in the amount of gain or loss for NIIT

purposes over the amount of gain or loss for regular income tax

Note. If you incur gain or loss from a disposition that isn’t

reported as described in the previous paragraph, report it on

line 7. See Line 7—Other Modifications to Investment Income,

later.

-7-

Instructions for Form 8960 (2023)

Keep for Your Records

Lines 5a–5d—Net Gains and Losses Worksheet

(A)

(B)

Total of columns (A)+(B)

Capital gains/(losses):

Form 1040 or 1040-SR,

line 7; Form 1041,

line 4; Form 1041-QFT,

line 3; Form 1040-NR,

statement reflecting

U.S. residency portion

of Form 1040 or

Ordinary gains/

(losses): Schedule 1

(Form 1040), line 4;

Form 1041, line 7;

Form 1041-QFT,

portion of line 4

attributed to ordinary

gain/(loss); Form

1040-NR, statement

reflecting U.S.

1040-SR, line 7

residency portion of

Schedule 1 (Form

1040), line 4

Enter

this

1.

2.

Beginning net gains and losses

amount

on line 5a

Gains and losses excluded from net investment income. Use current year amounts for lines 2a–2g and 2i.

(a) Enter net gains from the disposition of property used in a

non-section 1411 trade or business (enter as negative

amounts):

(

) (

)

Name of Trade or Business

Amount

(

(

)

)

(b) Enter net losses from the disposition of property used in

a non-section 1411 trade or business (enter as positive

amounts):

Name of Trade or Business

Amount

(c) Enter net losses from a former passive activity allowed

by reason of section 469(f)(1)(A). . . . . . . . . . . . . . . .

(d) Gains recognized in the current year for payments

received on an installment sale obligation or private

annuity for the disposition of property used in a

non-section 1411 trade or business. . . . . . . . . . . . . .

(

(

)

)

(e) Enter the net gain attributable to the net unrealized

appreciation (NUA) in employer securities. . . . . . . . . .

(f) In the case of a QEF (other than a QEF held in a section

1411 trade or business) for which a section 1.1411-10(g)

election isn’t in effect, enter the amount treated as

long-term capital gain for regular income tax purposes

under section 1293(a)(1)(B). . . . . . . . . . . . . . . . . . . .

(

)

(g) Enter any other gains and losses included in net

investment income that aren’t otherwise reported on

Form 8960 and any other gains and losses excluded

from net investment income reported on line 5a. (Enter

excluded gains as a negative number and excluded

losses as a positive number.). . . . . . . . . . . . . . . . . . .

(h) Enter the amount reported on line 2(i) of this worksheet

from your prior tax year return calculations. Enter as a

positive number. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i) If you don’t have a capital loss carryover to next year,

then skip this line and go to line 2(j). Otherwise, enter the

lesser of (i)(1) or (i)(2) as a negative amount. . . . . . . .

(

)

(i)(1) If the sum of the amounts

entered on lines 2(a)–2(h) and

line 3(d), column (A), is greater than

zero, enter that amount here.

Otherwise, enter -0- on line 2(i) and

go to line 2(j). . . . . . . . . . . . . . . . .

OR

(i)(2) The amount of capital loss

carried over to next year (Schedule D

(Form 1040), line 16, less the amount

allowed as a current deduction on

Schedule D (Form 1040), line 21)

entered as a positive

number .. . . . . . . . . . . . . . . . . . .

Enter

this

(j) Sumof lines 2(a) through 2(i)

amount

on line 5b

-8-

Instructions for Form 8960 (2023)

Keep for Your Records

Lines 5a–5d—Net Gains and Losses Worksheet—continued

(A)

(B)

Total of columns (A)+(B)

Capital gains/(losses):

Form 1040 or 1040-SR,

line 7; Form 1041, line 4;

Form 1041-QFT, line 3;

Form 1040-NR, statement

reflecting U.S. residency

portion of Form 1040 or

1040-SR, line 7

Ordinary gains/

(losses): Schedule 1

(Form 1040), line 4;

Form 1041, line 7;

Form 1041-QFT,

portion of line 4

attributed to ordinary

gain/(loss); Form

1040-NR, statement

reflecting U.S.

residency portion of

Schedule 1 (Form

1040), line 4

3.

Adjustment for gains and losses attributable to the disposition of interests in partnerships and S corporations

(a)

(i) Enter the amount of net gain from the disposition of a

partnership or S corporation included on line 5a to which

section 1411(c)(4)(A) applies. . . . . . . . . . . . . . . . .

Net

Gains

(ii) Enter the amount of net gain included in net investment

income after the application of Regulations section

1.1411-7. (The sum of columns A and B of line 3(a)(ii)

must be less than, or equal to, the sum of columns A and

B of line 3(a)(i).). . . . . . . . . . . . . . . . . . . . . . . . . .

(iii) Enter the difference between line 3(a)(i) and line 3(a)

(ii) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i) Enter the amount of net loss from the disposition of an

interest in a partnership or S corporation included on

line 5a to which section 1411(c)(4)(B) applies. . . . . .

(b)

Net

Losses

(ii) Enter the amount of net loss included in net investment

income after the application of Regulations section

1.1411-7. (The sum of columns A and B of line 3(b)(ii)

must be less than, or equal to, the sum of columns A and

B of line 3(b)(i).). . . . . . . . . . . . . . . . . . . . . . . . . .

(iii) Enter the difference between line 3(b)(i) and line 3(b)

(ii) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)

(i) Enter the amount of gain recognized in the current year

attributable to payments received on an installment sale

obligation or private annuity that was attributable to the

disposition of an interest in a partnership or an S

Deferred

Sales

corporation in a year preceding the current year. Also

report any gain or loss associated with section 736(b)

payments on this line. . . . . . . . . . . . . . . . . . . . . .

(ii) Enter the amount of adjustment attributable to such

gain .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iii) Subtract line 3(c)(ii) from line 3(c)(i). . . . . . . . . . . . .

(d)

4.

Combine the amounts on lines 3(a)(iii), 3(b)(iii), and 3(c)

Enter this

amount

(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

on line 5c

Sum of items reported on lines 5a–5c

Enter this

amount

Add lines 1, 2(j), and 3(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

on line 5d

If the amount of gain for NIIT purposes is less than the amount of gain for regular income tax purposes, the entry on line 3(a)(iii), 3(b)(iii),

or 3(c)(iii) should be a negative number.

TIP

If the amount of loss for NIIT purposes is less than the amount of loss for regular income tax purposes, the entry on line 3(a)(iii), 3(b)(iii), or

3(c)(iii) should be a positive number.

-9-

Instructions for Form 8960 (2023)

purposes. However, if the gain is higher (or the loss larger) for

NIIT purposes compared to regular income tax purposes, in

which case there’s no impact to the adjustment for capital loss

carryforwards for NIIT purposes, enter the difference on line 6.

(1) and deduct from net investment income any amounts

deducted from income for regular income tax purposes under

section 1296(a)(2). Use line 6 to make increases or decreases to

net investment income as a result of this rule (for items that

aren’t otherwise reflected on Form 8960).

Adjustments to your capital loss carryforwards.Starting in

2014, capital loss carryforwards must be adjusted if any sum of

all capital gain or loss amounts excluded from net investment

income on lines 5b and 5c was a net loss (the sum of all

excluded capital losses was greater than the sum of all excluded

capital gains). Generally, the annual adjustment to your capital

losses carryforward is the lesser of:

Section 1291 funds.If you’re subject to the section 1291 rules

for a PFIC, you’ll include in net investment income any “excess

distributions that are dividends for NIIT purposes as well as any

gains that are treated as excess distributions for regular income

tax purposes.Use line 6 to make the increases to net

investment income as a result of the application of this rule (for

items that aren’t otherwise reflected on Form 8960).

The amount of your capital loss carryforward from the

previous year (the sum of carryforward amounts reflected on

Schedule D (Form 1040), Capital Gains and Losses, lines 6 and

14); or

CFCs and QEFs with a section 1.1411-10(g) election in ef-

fect. If you have a section 1.1411-10(g) election in effect for a

CFC or QEF, you’ll include in net investment income any

inclusions under section 951(a), 951A, or 1293(a) derived from

the CFC or QEF. Inclusions under section 1293(a)(1)(B) may be

reported elsewhere on Form 8960, such as on line 5a. Use line 6

to make the increases to net investment income as a result of the

application of this rule (for items that aren’t otherwise reflected

on Form 8960).

The amount of excluded capital losses in excess of excluded

capital gain in the previous year.

See Lines 5a–5d—Net Gains and Losses Worksheet, in

these instructions, for assistance with the calculation of capital

loss carryforwards. In addition, see Proposed Regulations

section 1.1411-4(d)(4)(iii) for more information and a

comprehensive example of the application of this rule.

Note. If you included in income an amount under section 951(a)

or section 1293(a) for a CFC or QEF in 2013 and made an

election under Regulations section 1.1411-10(g) after 2013 for

that CFC or QEF, special rules may apply to certain distributions

of previously taxed income from the CFC or QEF that aren’t

subject to regular income tax. For more information, see

Regulations section 1.1411-10.

Pass-through entities.If you hold an interest in a pass-through

entity, the determination of whether a trade or business exists is

made at that entity's level.

Line 5c—Adjustment From Disposition of

Partnership Interest or S Corporation Stock

CFCs and QEFs without a section 1.1411-10(g) election in

effect. If you don’t have a section 1.1411-10(g) election in effect

for a CFC or QEF, you’ll generally include in net investment

income certain distributions of previously taxed income from the

CFC or QEF that aren’t subject to regular income tax. In addition,

other special rules may apply, including rules that provide, as

applicable, alternative basis calculations for your basis in the

CFC or QEF, or your basis in a domestic partnership or S

corporation that owns the interest in the CFC or QEF. Also, the

amount of investment interest expense you take into account for

NIIT purposes may be increased or decreased from the amount

taken into account for regular income tax purposes. (For

additional information on all of these rules, see Regulations

section 1.1411-10.) As a result of these rules, you may need to

include amounts in net investment income that aren't otherwise

reported on Form 8960 or make adjustments to amounts

reported elsewhere on Form 8960. For example, you may need

to include distributions from a CFC or a QEF in net investment

income. Use line 6 to make increases or decreases to net

investment income as a result of the application of this rule (for

items that aren’t otherwise reflected on Form 8960).

Enter the amount from the worksheet for lines 5a–5d, line 3d.

Attach a statement as described in Required statements, earlier,

to your return for the year of the disposition.

Line 6—Adjustments to Investment Income for

Certain CFCs and PFICs

If you own stock, directly or indirectly, in a CFC or a PFIC (other

than certain CFCs and PFICs held in a section 1411 trade or

business or PFICs marked to market under a provision of Code

chapter 1 other than section 1296), use line 6 for adjustments

necessary to calculate your net investment income.

Income from investments in CFCs and PFICs is generally

included in the calculation of net investment income and, in

many cases, will be included (in whole or in part) on other lines

of Form 8960. Generally, dividends from a CFC or a PFIC that

are included in your regular income tax base are included on

Form 8960, line 2, and gains and losses derived from the stock

of a CFC or a PFIC that are included in your regular income tax

base are generally included on Form 8960, line 5. Also, income

derived from CFCs and certain PFICs you hold in a section 1411

trade or business is generally reported on Form 8960, line 4a.

Note. Use line 5b to deduct inclusions under section 1293(a)(1)

(B) that are allowed on line 5a, or to adjust the amount of gain or

loss derived from the disposition of shares of a CFC or QEF.

However, if the gain included in net investment income is higher

than the amount reported for regular income tax (or the loss is

greater), report the adjustment on line 6.

Line 6 is used for adjustments that are the result of additional

rules. These additional rules may apply when you own an

interest in a CFC or PFIC and may require you to subtract or add

amounts not otherwise included on Form 8960. These additional

rules vary depending on the set of anti-deferral rules that apply

to you for regular income tax purposes, and for CFCs and QEFs,

and depending on whether you have a Regulations section

1.1411-10(g) election in effect for the CFC or QEF. For more

information about determining the amount to report on line 6, see

Regulations section 1.1411-10.

Note. Even if you don’t have a section 1.1411-10(g) election in

place for a CFC or QEF, there are certain instances in which

distributions to you from the CFC or QEF may not be subject to

NIIT. For example, if a prior holder of the CFC or QEF had made

a section 1.1411-10(g) election for that CFC or QEF and you

receive a distribution of earnings and profits that were previously

included in the net investment income of the prior holder, you

may not be subject to NIIT on that distribution. For more

information, see Regulations section 1.1411-10.

Section 1296 mark-to-market PFICs.Generally, if you’re

subject to the section 1296 mark-to-market rules for a PFIC,

you’ll include in net investment income any amounts included in

income for regular income tax purposes under section 1296(a)

-10-

Instructions for Form 8960 (2023)

Line 7—Other Modifications to Investment Income

Form 8814 election.Parents electing to include their child's

dividends and capital gain distributions in their income by filing

Form 8814 include on Form 8960, line 7, the amount on Form

8814, line 12, excluding Alaska Permanent Fund Dividends.

Use line 7 to report additional net investment income

modifications to net investment income that aren’t otherwise

specified on lines 1–6. For example, use line 7 to report additions

and modifications to net investment income, such as the

following.

Distributions from estates and trusts.Enter the amount from

box 14, code H, of Schedule K-1 (Form 1041), Beneficiary's

Share of Income, Deductions, Credits, etc.

Section 1411 net operating loss (NOL) (enter as a negative

amount). See Section 1411 NOL, later.

Note. If the amount reported in box 14, code H, of Schedule K-1

(Form 1041) is a positive number, enter it on Form 8960, line 7,

and increase your MAGI on Form 8960, line 13 (or Form 8960,

line 19a) by the same amount.

If the amount reported in box 14, code H, of Schedule K-1

(Form 1041) is a negative number, and the trust has indicated

some (or all) of the adjustment also requires a MAGI adjustment,

enter it on Form 8960, line 7, and make the applicable increase

or decrease to your MAGI on Form 8960, line 13 (or Form 8960,

line 19a) as necessary.

Any deductions described in section 62(a)(1) that are properly

allocable to a passive activity or trading business, but aren’t

taken into account on line 4a or 5a (enter as a negative amount).

See Other section 62(a)(1) deductions, later.

Adjustments for distributions from estates and trusts. See

Distributions from estates and trusts, later.

Section 404(k) dividends reported on line 2 (enter as a

negative amount). See Line 2—Ordinary Dividends, earlier.

Interest income reported on line 1 received from certain

nonpassive activities (entered as a negative amount). See

Self-charged interest, later.

Section 1411 NOL.If you are allowed an NOL deduction under

section 172 for purposes of determining your regular income tax,

you may also be allowed some, or all, of the NOL deduction in

computing net investment income. Because NOLs are computed

and carried over year by year, you must determine for each NOL

year what portion of the NOL is attributable to net investment

income. To determine how much of the accumulated NOL you

can use in the current tax year as a deduction against your net

investment income, you must first calculate your applicable

portion of the NOL for each loss year. For more information and

examples on the calculation of a section 1411 NOL and its use,

see Regulations section 1.1411-4(h).

Recoveries of deductions taken on a prior year's Form 8960.

See Deduction recoveries, later.

Other items of net investment income (or properly allocable

deductions) not otherwise included on Form 8960 reported on

Schedule 1 (Form 1040), line 8z; Form 1041, line 8; Form

1041-QFT, lines 4 and 9; Form 1040-NR, amount on statement

reporting tax items for your period of U.S. residency

corresponding to Schedule 1 (Form 1040), line 8z. For example,

these items could include the following.

1. Amountsreported on Form 8814, Parents' Election To

Report Child's Interest and Dividends, line 12. See Form 8814

election, later.

Note. No portion of an NOL incurred in a tax year beginning

before 2013 is permitted to reduce net investment income.

Calculating your section 1411 NOL.In any tax year in

which a taxpayer incurs an NOL, the section 1411 NOL is the

lesser of:

2. Substituteinterest and dividend payments (generally

reported on Form 1099-MISC, Miscellaneous Information).

3. Netpositive periodic payments received from a notional

principal contract (NPC) that’s referenced to property (including

an index) that produces (or would produce, if the property were

to produce income) interest, dividends, royalties, or rents. For

example, an interest rate swap, cap, or floor and an equity swap

would be treated as an NPC that produces net investment

income.

The amount of the NOL for the loss year the taxpayer would

incur if only items of gross income that are used to determine net

investment income and only properly allocable deductions (other

than a section 1411 NOL) are taken into account in determining

the NOL under section 172, or

Gains and losses from the disposition of property not included

The amount of the taxpayer's NOL for the loss year.

on line 5a that are taken into account in computing taxable

income. For example:

For purposes of calculating the section 1411 NOL,

compute your NOL using Form 1045, Application for

Tentative Refund, Schedule A—NOL, with only items of

TIP

1. Gainor loss from the disposition of an annuity or life

insurance contract (see Line 3—Annuities, earlier); and

income, gain, loss, and deduction on Form 8960 for that year. If

this amount is less than your NOL computed for regular income

tax purposes, then this amount is the applicable portion of your

NOL. If this amount is equal to, or greater than, your NOL

computed for regular income tax purposes, then your applicable

portion is 100% of the regular income tax NOL (which means the

entire NOL will be deductible in computing net investment

income when the NOL is used for regular income tax purposes).

2. Casualtyand theft losses reported on Schedule A (Form

1040), Itemized Deductions, line 15 (enter as a negative

amount).

However, gains and losses attributable to assets held in a

non-section 1411 trade or business aren’t included in net

investment income. For more information, see Line 5b—Net

Gain or Loss From Disposition of Property That Isn’t Subject to

Net Investment Income Tax, earlier.

Using your section 1411 NOL.When you deduct an NOL

that originated in a previous year against the current year

income, a portion of the NOL may be deductible in computing

net investment income for the current year, regardless of whether

you’re subject to the NIIT in the current year without the NOL

deduction. The amount of the regular income tax NOL used in

calculating net investment income is called the “applicable

portion.The applicable portion is the percentage of the regular

income tax NOL that’s a section 1411 NOL. Because NOLs are

calculated on a year-by-year basis, the applicable portion of

each NOL that’s used in the current year may be different.

Other section 62(a)(1) deductions.Use line 7 to report

additional deductions attributable to a section 1411 trade or

business that aren’t included on lines 4–6. Generally, these

deductions are above-the-line deductions reported on Schedule

1 (Form 1040), lines 11–25.

Note. Expenses associated with the trade or business of trading

in financial instruments or commodities that are reported on your

Schedule C (Form 1040) are reported on Form 8960, line 10.

See Special rule for traders in financial instruments or

commodities, later.

Note. If you incurred an NOL after 2012 and carried back that

Note. Early withdrawal penalty (Schedule 1 (Form 1040),

NOL to offset income in years preceding the imposition of the

line 18) is reported on Form 8960, line 10.

-11-

Instructions for Form 8960 (2023)

Example: Calculation of Section 1411 NOL for NIIT

Assume an unmarried individual incurs the following NOLs and has waived any potential carryback for each passing year under

section 172(b)(3), and assume that carryforwards are not limited:

(C) Applicable Portion of NOL

[column B divided by column A]

NOL Origination Year

(A) Regular Income Tax NOL

(B) Section 1411 NOL

2018 Calendar Year

2019 Calendar Year

2020 Calendar Year

2021 Calendar Year

$150,000

$100,000

$40,000

None

0.00%

30.0%

100%

50.0%

$30,000

$40,000

$60,000

$120,000

Beginning in 2022, the unmarried individual begins to use the NOLs to offset income:

Tax Year

NOL Origination Year

Regular Income

$300,000

Applicable Portion

Section 1411 NOL

2022 Tax Year

2018 NOL

2019 NOL

2020 NOL

2021 NOL

($150,000)

($100,000)

($40,000)

0.00%

30.0%

100.0%

50.0%

None

($30,000)

($40,000)

($5,000)

($75,000)

($10,000)

Total section 1411 NOL allowed as deduction against 2022 net investment income. . . . . . . . . . . . . .

In 2022, the regular income tax NOLs from 2018–2021 have caused the taxpayer’s AGI ($0) to fall below the statutory threshold; therefore,

the individual isn’t subject to the NIIT.

Tax Year

NOL Origination Year

Regular Income

$600,000

Applicable Portion

Section 1411 NOL

2023 Tax Year

2021 NOL

($110,000)

50.0%

($55,000)

Total section 1411 NOL allowed as deduction against 2023 net investment income. . . . . . . . . . . . . .

($55,000)

In 2023, the regular income tax NOL remaining from 2021 has reduced the taxpayer’s income for regular income tax to $490,000. The

individual is entitled to reduce net investment income by $55,000 (entered as a negative amount on Form 8960, line 7).

NIIT (for example, a carryback to calendar year 2011 and/or

2012), the amount of section 1411 NOL that was included in the

NOL carryback would’ve been used (as an applicable portion)

even though the NIIT wasn’t in effect.

There are two exceptions to including recovered amounts in

net investment income. The two exceptions apply the tax benefit

rule of section 111 within the NIIT system, and therefore operate

independently of the application of section 111 for Code

chapter 1 purposes. First, properly allocable deductions aren’t

reduced in the year of the recovery if the amount deducted in the

prior year didn’t reduce the amount of section 1411 liability.

Second, properly allocable deductions aren’t reduced in the year

of the recovery if the amount deducted in the prior year is

included in net investment income.

See Example: Calculation of Section 1411 NOL for NIIT, in

these instructions, for an illustration of the calculation and use of

a section 1411 NOL for NIIT purposes.

Deduction recoveries.A recovery or refund of a previously

deducted item increases net investment income in the year of

the recovery. There are two exceptions to this general rule.

Note. The total amount of recovery reported on Form 8960,

line 7, can’t exceed the total amount of properly allocable

deductions for the year.

Generally, for purposes of determining the gross amount of

the recovery, include the recovery of any amount that was

deducted in a prior year, regardless of the application of the tax

benefit rule (see section 111). For example, if a taxpayer

receives a refund of state income taxes from a prior year, such a

refund would be included in the taxpayer's gross income.

However, if the taxpayer was subject to the alternative minimum

tax in the year of the payment, the taxpayer may not have

received any tax benefit under chapter 1 of the Code, and

therefore section 111 may exclude some or all of the refund from

gross income. However, the deductibility of state income taxes

for NIIT is independent of the taxes for alternative minimum tax

purposes. Therefore, the applicability of the recovery rule is

determined without regard to whether the recovered amount was

excluded from gross income by reason of section 111.

-12-

Instructions for Form 8960 (2023)

If the recovered amount relates to a deduction taken in a

tax year beginning before 2013, none of the recovery is

included in net investment income in the year of

If the recovered amount is included in net investment

income on lines 1–6, none of the recovery is included in

net investment income on line 7.

TIP

TIP

recovery.

See Regulations section 1.1411-4(g)(2) for more information

and examples. See Line 7—Deduction Recoveries Worksheet, in

these instructions, to determine the amount of any recovery to

include on line 7.

If the recovered amount relates to a deduction taken in a

tax year beginning after 2012 and you weren’t subject to

TIP

the NIIT because your MAGI (see Line 13—Modified

Adjusted Gross Income (MAGI), later, was below the applicable

threshold on line 14, then none of the recovery is included in net

investment income in the year of recovery. However, this rule

doesn’t apply if you incurred an NOL in the year of the deduction,

and a portion of your NOL is a section 1411 NOL.

In the case of multiple recoveries in a single year,

complete this worksheet for each recovery. If multiple

recoveries relate to a single deduction year, the amount

TIP

reported on lines 8 and 9 of the first recovery worksheet will

become lines 7 and 10, respectively, on the second recovery

worksheet.

Keep for Your Records

Line 7—Deduction Recoveries Worksheet

1. Enter total amount of recovery included in gross income. . . . . . . . . . . . . . .1.

Don’t include recoveries of items that are included in net investment

income in the year of recovery (included on lines 1–6).

Don’t include recoveries of items if the amount relates to a deduction

taken in a tax year beginning before 2013.

Don’t include recoveries of items if the amount relates to a deduction

taken in a tax year beginning after 2012, and you weren’t subject to the

NIIT solely because your MAGI was below the applicable threshold.

This rule doesn’t apply if you incurred an NOL in such year, and a portion

of such NOL constitutes a section 1411 NOL.

!

CAUTION

2. Amount of the recovery that would’ve been included in gross income,

except for the application of the tax benefit rule under section 111. . . . . .2.

3. Total amount of recovery (add lines 1 and 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.

4. Enter the percentage of the deduction allocated to net investment income

in the prior year. (If the deduction wasn’t allocated between investment

income and noninvestment income, enter 100%.). . . . . . . . . . . . . . . . . . . . .4.

5. Enter the lesser of (a) line 3 multiplied by line 4, or (b) the total amount deducted

on the prior year Form 8960 attributable to items recovered (after any deduction

limitations imposed by section 67 or 68). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.

Calculation of recoveries when the deduction isn’t taken into account in computing your section 1411 NOL

6. Multiply line 5 by 3.8% (0.038). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.

7. Enter the amount of net investment income in the year of the deduction

(previous year’s Form 8960, line 12, unless line 12 is zero, then previous

year's Form 8960, line 8 minus line 11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.

8. Add the amount on line 5 to line 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.

9. Using the previous year's Form 8960, recalculate the NIIT for the year of

the deduction by replacing the amount reported on line 12 with the

amount reported on line 8 of this worksheet (don’t use the net investment

income reported on that year's Form 8960, line 12). Enter your

recalculated NIIT here. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.

10. Enter the NIIT reported for the year of the deduction. . . . . . . . . . . . . . . . . . .

11. Subtract line 10 from line 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.

12. Enter the smaller of line 6 or line 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12.

10.

13. Divide line 12 by 3.8% (0.038). Enter the result here and include on

Form 8960, line 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13.

Calculation of recoveries when the deduction is taken into account in computing your section 1411 NOL

14. Enter the amount of the section 1411 NOL in the year of the deduction

(entered as a positive number). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14.

15. Enter the amount of the section 1411 NOL in the year of the deduction

recomputed without the amount on line 5 (entered as a positive number,

but not less than zero). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15.

16. Subtract line 15 from line 14. Enter the result here and include on

Form 8960, line 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16.

-13-

Instructions for Form 8960 (2023)

If you have more than one of the deductions described above,

you may use a different method of allocation for each one. The

reasonable method of allocation may differ from year to year.

Examples of reasonable methods of allocation include, but

aren’t limited to, an allocation of the deduction based on the ratio

of the amount of a taxpayer's gross investment income (Form

8960, line 8) to the amount of the taxpayer's AGI. In the case of

an estate or trust, an allocation of a deduction under Regulations

section 1.652(b)-3(b), and in the case of an ESBT, Regulations

section 1.641(c)-1(h), is also a reasonable method.

Self-charged interest.The self-charged interest rules under

section 469 (passive activity loss limitation) apply to lending

transactions between a taxpayer and a pass-through entity in

which the taxpayer owns a direct or indirect interest, or between

certain pass-through entities. The section 469 self-charged

interest rules apply only to items of interest income and interest

expense that are recognized in the same tax year. The

self-charged interest rules:

Treat certain interest income resulting from these lending

transactions as passive activity income,

Treat certain deductions for interest expense that are properly

Note. If an estate or trust allocates expenses for regular income

tax purposes under Regulations section 1.652(b)-3(b) or

1.641(c)-1(h), any deviation from that allocation may not be a

reasonable allocation method for NIIT purposes.

allocable to the interest income as passive activity deductions,

and

Allocate the passive activity gross income and passive activity

deductions resulting from this treatment among the taxpayer's

activities.

Items not deductible in calculating net investment income.

Unless a deduction is specifically identified as properly allocable

to net investment income in the section 1411 regulations, or in

supplemental guidance issued by the IRS in the Internal

Revenue Bulletin, the deduction isn’t permitted.

The rules for computing net investment income adopt a

similar rule for self-charged interest. See Regulations section

1.1411-4(g)(5). Include on line 7 (as a negative amount) the

amount of interest income you received that’s equal to the

amount of interest income that would’ve been considered

passive income under the self-charged interest rules

(Regulations section 1.469-7) had the nonpassive activity been

considered a passive activity.

Line 9a—Investment Interest Expense

Enter on Form 8960, line 9a, interest expense you paid or

accrued during the tax year deducted on Schedule A (Form

1040), line 9. Estates and trusts enter the amount from Form

4952, line 8 (if not required to file Form 4952, use the form as a

worksheet). For individuals filing a Form 1040-NR, include only

the amount of investment interest expense deduction for your

U.S. residency period.

Note. This rule doesn’t apply to interest received on loans made

to a trade or business engaged in the trading of financial

instruments or commodities.

Note. Don’t include any adjustment for interest income on line 7

(as a negative amount) if the corresponding interest deduction is

also taken into account in determining your self-employment

income that’s subject to tax under section 1401(b).

Note. If Form 4952 includes investment interest expense that’s

deducted on Schedule E (Form 1040) and already taken into

account on line 4a, don’t include the same amount on line 9a.

Part II—Investment Expenses

Allocable to Investment Income and

Modifications

Note. If you own a CFC or QEF for which a section 1.1411-10(g)

election isn’t in effect, you may calculate your section 163(d)

investment expense deduction for NIIT purposes differently than

for regular income tax purposes. See Regulations section

1.1411-10(c)(5) for additional guidance. Any modification to your

section 163(d) investment expense deduction for NIIT purposes

is taken into account on line 6.

Investment Expenses

Part II of Form 8960 includes deductions and modifications to

net investment income that aren’t otherwise included in Part I.

Generally, expenses associated with a passive activity trade or

business, or the trade or business of trading in financial

Line 9b—State, Local, and Foreign Income Tax

instruments or commodities conducted through a pass-through

entity are already included on line 4a or on line 5a. Part II is used

to report deductions that are, predominately, itemized

Include state, local, and foreign income taxes you paid for the tax

year that are attributable to net investment income. Form

1040-NR filers include only taxes paid for the U.S. residency

period of the tax year. Sales taxes aren’t deductible in computing

net investment income. You may not take a deduction for any

foreign income taxes paid for the tax year if you took a credit for

any portion of them. See section 275(a)(4).

deductions. For more information on what constitutes properly

allocable deductions, see Regulations sections 1.1411-4(f)–(g).

Reasonable method allocations.To the extent that you have

a properly allocable deduction that’s allocable to both net

investment income and excluded income, you may use any

reasonable method to determine that portion of the deduction

that’s properly allocable to net investment income. The three

items that may be allocated between net investment income and

excluded income are the following.

You can determine the portion of your state, local, and foreign

income taxes allocable to net investment income using any

reasonable method. See Reasonable method allocations,

earlier, and Deductions subject to AGI limitations under section

67 or section 68, later.

State, local, and foreign income taxes if properly deducted on

your return when calculating your U.S. regular income tax.

All ordinary and necessary expenses paid or incurred during

Miscellaneous itemized deductions are suspended for

the tax year to determine, collect, or obtain a refund of any tax

owed if properly deducted on your return when calculating your

U.S. regular income tax.

tax years 2018 through 2025. Miscellaneous itemized

!

CAUTION

deductions under section 67 aren’t allowed for tax years

beginning after 2017 and before 2026. See section 67(g).

Amounts paid or incurred by the fiduciary of an estate or trust

on account of administration expenses, including fiduciaries'

fees and expenses of litigation, which are ordinary and

necessary in connection with the performance of the duties of

administration if properly deducted on your return when

calculating your U.S. regular income tax.

The overall limitation on itemized deductions is also

suspended for tax years 2018 through 2025. The overall

limitation on itemized deductions under section 68 doesn’t apply

for tax years beginning after 2017 and before 2026. See section

68(f).

-14-

Instructions for Form 8960 (2023)

We continue to discuss miscellaneous itemized deductions

under section 67 (and the 2%-of-AGI limitation) and the overall

limitation on itemized deductions under section 68; however,

they are suspended for tax years 2018 through 2025.

instruments or commodities, you may use the net loss amount

on your Schedule C (Form 1040) as a deduction on line 10, and

you don’t need to complete Schedule SE (Form 1040),

Self-Employment Tax.

If you have more than one trade or business, you must

complete Schedule SE (Form 1040) to determine whether you

can include some or all of the trading business Schedule C

(Form 1040) expenses as a deduction on line 10. Complete the

Line 10 Worksheet for Traders in Financial Instruments That

Maintain More Than One Trade or Business.

Note. Enter the amount of state, local, or foreign income taxes

on Form 8960, line 9b, net of any deduction limitations imposed

by section 68. See Lines 9 and 10—Application of Itemized

Deduction Limitations on Deductions Properly Allocable to

Investment Income Worksheet in these instructions for

assistance in figuring the amount to report on line 9b.

Note. See the Instructions for Schedule SE (Form 1040) for who

must file a Schedule SE (Form 1040). Retain a copy of the

Schedule SE (Form 1040) and the worksheet used to determine

the expenses included as a modification on line 10 with your

records. Don’t file the worksheet with Form 1040 or 1040-SR.

Line 9c—Miscellaneous Investment Expenses

Investment expenses you incur that are directly connected to the

production of investment income are deductible expenses in

determining your net investment income. Generally, these

amounts are reported on Form 4952, line 5. See Form 4952 for

the instructions for line 5 for more information. The amounts

reported on line 9c are the amounts allowable after the

application of the deduction limitations imposed by sections 67

and 68.

See Deductions subject to AGI limitations under section 67 or

section 68, later.

Note. Enter the amount of miscellaneous investment expenses

on Form 8960, line 9c, net of any deduction limitations imposed

by section 67 or section 68. See Lines 9 and 10—Application of

Itemized Deduction Limitations on Deductions Properly

Allocable to Investment Income Worksheet in these instructions

for assistance in figuring the amount to report on line 9c.

See Caution regarding miscellaneous itemized deductions,

earlier.

Don’t include expenses that have been deducted on

other lines of the Form 8960, such as depletion or

depreciation reported on Schedule E (Form 1040) and

TIP

included on Form 8960, line 4a.

Dual-status individuals include only tax items related to their

period of U.S. residency. See Dual-status individual, earlier.

DO NOT use the following worksheet to calculate

limitations for tax years beginning after 2017 and before

!

CAUTION

2026.

See Caution regarding miscellaneous itemized deductions,

earlier.

Line 10—Additional Modifications

Use line 10 to report additional deductions and modifications to

net investment income that aren’t otherwise reflected on lines 1–

9. Enter amounts on line 10 as positive numbers.

Note. Enter the amount on line 10 after the application of

section 67 or 68. See Lines 9 and 10—Application of Itemized

Deduction Limitations on Deductions Properly Allocable to

Investment Income Worksheet in these instructions for

assistance in figuring the amount to report on line 10.

See Caution regarding miscellaneous itemized deductions,

earlier.

You may use line 10 to report properly allocable deductions.

See Regulations sections 1.1411-4(f) and 1.1411-4(g) for

details.

Special rule for traders in financial instruments or com-

modities. If your only business is trading in financial

-15-

Instructions for Form 8960 (2023)

Lines 9 and 10—Application of Itemized Deduction Limitations

on Deductions Properly Allocable to Investment Income

Worksheet

Keep for Your Records

Part I—Application of Section 67 to Deductions Properly Allocable to Investment Income

1. Enter the amount of Miscellaneous Itemized Deductions properly allocable to

investment income before any itemized deduction limitations (description and

Form 8960 line number where they’ll be reported):

Description

Line

Amount

(a)

(b)

2. Enter the total of all items listed in line 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3.

3. Enter the amount of Miscellaneous Itemized Deductions shown on your current

return after the application of the section 67 2%-of-AGI limitation. . . . . . . . . . . .

4. Enter the lesser of the total reported on line 2 or line 3. . . . . . . . . . . . . . . . . . . .

4.

Part II—Application of Section 67 Limitation to Specific Deductions

(B)

IF line 3 is less than

line 2, THEN divide

line 3 by line 2 AND

enter the amount in

column (B).

IF amounts reported

on Part I, lines 2 and

4, are equal, THEN

enter 1.00 in column

(B).

(C)

Multiply the

individual

amounts in

column (A) by

the amount in

column (B).

(A)

Re-enter the amounts and descriptions from Part I, line 1.

Description

Line

Amount

(a)

(b)

x

x

=

=

Individuals—Use the amounts in column (C) on Part III, line 1, to determine the amount of these deductions that are allowable

after the application of the section 68 limitation.

TIP

Estates or trusts—Enter the amounts in column (C) in the appropriate location on lines 9 and 10. Don’t complete Part III or IV

of this worksheet.

-16-

Instructions for Form 8960 (2023)

Lines 9 and 10—Application of Itemized Deduction Limitations

on Deductions Properly Allocable to Investment Income

Worksheet—continued

Keep for Your Records

Part III—Application of Section 68 to Deductions Properly Allocable to Investment Income (Individuals Only)

1. Enter the amount of Miscellaneous Itemized Deductions properly allocable to

investment income from column (C) of Part II:

Description

Line

Amount

(a)

(b)

2. Enter the amount of state, local, and foreign income taxes that are properly

allocable to investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3. Enter the amounts of other Itemized Deductions subject to the section 68

limitation and properly allocable to investment income before any itemized

deduction limitations (description and Form 8960 line number where they’ll be

reported):

Description

Line

Amount

(a)

(b)

4. Enter the total deductions properly allocable to investment income subject to the section 68 limitation. Enter

the sum of lines 1 through 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.

5. Enter the amount of total itemized deductions reported on Form 1040 or

1040-SR .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

6. Enter all other itemized deductions allowed but not subject to the section 68

deduction limitation:

(a) Investment Interest Expense. . . . . . . . . . . . . . . . . . . . .

(b) Casualty Losses (other than losses described in section

165(c)(1)) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) Medical Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) Gambling Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) Total of lines 6(a) through 6(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6(e).

7. Subtract line 6(e) from line 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.

8. Enter the lesser of line 7 or line 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.

This is the amount of itemized deductions that are properly allocable to investment income after the application of the sections 67

TIP

and 68 deduction limitations. Use Part IV of this worksheet to reconcile this amount to the individual deduction amounts reported

on Form 8960, lines 9 and 10.

-17-

Instructions for Form 8960 (2023)

Lines 9 and 10—Application of Itemized Deduction Limitations

on Deductions Properly Allocable to Investment Income

Worksheet—continued

Keep for Your Records

Part IV—Reconciliation of Schedule A Deductions to Form 8960, Lines 9 and 10 (Individuals Only)

(B)

IF Part III, line 8, is

less than Part III,

(C)

line 4, THEN divide

line 8 by line 4

Multiply the

individual

AND enter the

amount in column

(B).

IF the amounts

reported on Part III,

lines 4 and 8, are

equal, THEN enter

1.00 in column (B).

amounts in

column (A) by the

amount in column

(B). Enter these

amounts in the

appropriate

(A)

Re-enter the amounts and descriptions from Part III, lines 1–

3.

locations on lines

9 and 10.

Miscellaneous Itemized Deductions properly

allocable to investment income:

Description

Line

Amount

1.

(a)

(b)

×

×

×

=

=

=

2. State, local, and foreign income taxes. . . . . . . . . .

Itemized Deductions Subject to Section 68

Included on Line 3 of Part III:

3.

(a)

(b)

×

×

=

=

-18-

Instructions for Form 8960 (2023)

The amounts reported on line 10 are the amounts allowable

after the application of the deduction limitations imposed by

sections 67 and 68, as applicable. See Deductions subject to

AGI limitations under section 67 or section 68 next.

See Caution regarding miscellaneous itemized deductions,

earlier.

Part III—Tax Computation

Deductions subject to AGI limitations under section 67 or

section 68.Any deduction allowed against net investment

income that, for purposes of computing your regular income tax,

is subject to either the 2% floor on miscellaneous itemized

deductions (section 67) or the overall limitation on itemized

deductions (section 68) is allowed in determining net investment

income, but only to the extent the items are deductible after

application of both limitations.

Individuals

Individuals complete lines 13–17.

Line 13—Modified Adjusted Gross Income (MAGI)

If you didn’t exclude any amounts from your gross income under

section 911 and you don’t own a CFC or PFIC, your MAGI is your

AGI as reported on Form 1040 or 1040-SR. If you exclude

amounts under section 911 or own certain CFCs or PFICs, your

MAGI is your AGI as modified by certain rules described in

Regulations section 1.1411-10(e)(1).

See Caution regarding miscellaneous itemized deductions,

earlier.

Miscellaneous itemized deductions.The amount of your

miscellaneous itemized deductions, after application of the 2%

floor but before application of the overall limitation, used in

determining your net investment income is the lesser of:

Section 911.If you exclude amounts from income under

section 911, to calculate your MAGI, you must increase your AGI

by the excess of the amount excluded from income under

section 911(a)(1) over the amount of any deductions (taken into

account in computing AGI) or exclusions disallowed under

section 911(d)(6) for the amount excluded from income under

section 911(a)(1). Use Line 13—MAGI Worksheet in these

instructions to compute your MAGI.

That portion of your miscellaneous itemized deductions

before the application of the 2% floor that’s properly allocable to

net investment income, or

Your total miscellaneous itemized deductions allowed after the

application of the 2% floor but before the application of the

overall limitation on itemized deductions.

See Caution regarding miscellaneous itemized deductions,

CFCs and PFICs.If you own, directly or indirectly, stock in a

CFC or PFIC other than certain CFCs and PFICs held in a

section 1411 trade or business or PFICs marked to market under

section 1296 or any other provision, to calculate your MAGI, you

may need to make certain adjustments to your AGI, as provided

in Regulations section 1.1411-10(e)(1). Generally, these

adjustments include the following.

earlier.

Itemized deductions.The amount of your itemized

deductions allowed in determining your net investment income

after applying both the 2% floor and the overall limitation is the

lesser of:

The sum of :

1. Theamount of your miscellaneous itemized deductions

1291 funds.

allowed as a deduction against your net investment income

(before application of the overall limitation), and

1. IncreaseAGI by the amount of any excess distributions

derived from a PFIC that are dividends included in MAGI but not

included in gross income for regular income tax purposes, and

2. Thetotal amount of your itemized deductions that aren’t

subject to the 2% floor and are properly allocable to items of

income or net gain for purposes of determining your net

investment income; or

2. IncreaseAGI by the amount of any gain treated as an

excess distribution under section 1291 included in MAGI but not

included in gross income for regular income tax purposes.

The total amount of your itemized deductions allowed after the

CFCs and QEFs without a section 1.1411-10(g) election in

application of both the 2% floor and the overall limitation on

itemized deductions.

effect.

1. DecreaseAGI by the amount of any section 951(a), 951A,

or 1293(a) inclusions;

For more information and examples, see Regulations section

1.1411-4(f)(7).

Line 10—Worksheet for Traders in Financial Instruments That

Maintain More Than One Trade or Business

Keep for Your Records

Use this worksheet to determine the amount on line 10.

1. Enter the total amount from Schedule SE (Form 1040), line 3. . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2. (a) If the amount on Schedule SE (Form 1040), line 3, is zero or greater, you can’t use the

expenses from your trade or business to reduce your investment income. Stop here.

(b) If the amount on Schedule SE (Form 1040), line 3, is a negative amount, enter your

expenses from your trade or business of trading in financial instruments or commodities

(entered as a positive amount). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2(b).

3. Add line 1 to line 2(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

(a) If the amount on line 3 of this worksheet is zero or less, include the trade or business

expenses (line 2(b) of the worksheet) on Form 8960, line 10.

(b) If the amount on line 3 of this worksheet is a positive number, convert the amount from

Schedule SE (Form 1040), line 3 (line 1 of this worksheet) into a positive number and

include it on Form 8960, line 10.

-19-

Instructions for Form 8960 (2023)

Keep for Your Records

Line 13—MAGI Worksheet

1. Enter your Adjusted Gross Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.

2. Foreign Earned Income Exclusion:

(a) Enter your Foreign Earned Income Exclusion (from

line 42 of Form 2555). . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) Enter the deductions reported on line 44 of Form

2555 allocable to your Foreign Earned Income

Exclusion .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(

)

(c) Combine lines 2(a) and 2(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.

Adjustments for certain CFCs and certain PFICs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.

3.

4. Enter the sum of line 1, line 2(c), and line 3. (Enter this amount on Form 8960,

line 13.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.

2. IncreaseAGI by the amount of any distributions described

in section 959(d) or 1293(c) included in your net investment

income as a dividend;

3. Increaseor decrease AGI (as appropriate) by the amount

of any adjustment to gain or loss on the disposition of the CFC or

QEF that results in an adjustment to your MAGI;

4. Increaseor decrease AGI (as appropriate) by the amount

of any adjustment to gain or loss on the disposition of an interest

in a domestic partnership or S corporation that holds a CFC or

QEF that results in an adjustment to your MAGI;

5. Increaseor decrease AGI (as appropriate) by the amount

of any adjustment to investment interest expense under

Regulations section 1.1411-10(c)(5) that’s taken into account in

computing MAGI; and

NRA spouse. Note that if you made a section 6013(g) or 6013(h)

election to file jointly with your NRA spouse, but don’t also elect

to apply the joint return election for NIIT purposes, then, for NIIT

purposes, you’ll file as married filing separately and need to use

the applicable threshold amount.

Line 17—Net Investment Income Tax for

Individuals

Form 1040 or 1040-SR filers: Include this amount on

Schedule 2 (Form 1040), line 12, and see the instructions there.

Form 1040-NR filers: Include this amount on the line of your

U.S. residency statement corresponding to Schedule 2 (Form

1040), line 12, and see the Instructions for Form 1040-NR for the

amount to report on your tax return.

6. Increaseor decrease AGI (as appropriate) by the amount

reported to you in box 14, code H, of Schedule K-1 (Form 1041)

that requires a MAGI adjustment.

See Dual-status individual, earlier.

CFCs and QEFs held in a section 1411 trade or business or

Estates and Trusts

with a section 1.1411-10(g) election in effect.

Estates and trusts complete lines 18–21.

Increase AGI by the amount of any distributions described in

section 959(d) or 1293(c) included in your net investment

income as a dividend (not applicable to tax years beginning

before 2014).

Line 18b—Deductions for Distributions of Net

Investment Income and Charitable Deductions

If you don’t own (directly or indirectly) any interests in

The undistributed net investment income of an estate or trust

(reported on line 18c) equals its net investment income (reported

on line 18a) reduced by the net investment income included in

the distributions to beneficiaries deductible by the estate or trust

under section 651 or 661, and by the net investment income for

which the estate or trust was entitled to a section 642(c)

deduction, in each case as calculated under Regulations section

1.642(c)-2 and the allocation and ordering rules under

Regulations section 1.662(b)-2. In the case of the S portion of an

Electing Small Business Trust, as defined by section 1361(e),

net investment income is further reduced by the net investment

income for which the trust was entitled to a section 170

deduction. See Section 641(c)(2)(E).

CFCs or PFICs, and don’t exclude any foreign earned

income on Form 2555, Foreign Earned Income, enter

TIP

your AGI from Form 1040 or 1040-SR on line 13.

Line 14—Threshold Based on Filing Status

The threshold amount is based on your filing status.

Filing Status

Threshold Amount

$250,000

Married Filing Jointly

Qualifying Surviving Spouse

Married Filing Separately

Single or Head of Household

$250,000

$125,000

$200,000

Regulations section 1.1411-3(e) applies the class system of

income categorization, generally embodied in sections 651

through 663 and related regulations, to arrive at the trust's net

investment income reduction in the case of distributions that are

comprised of both net investment income and net excluded

income items. See Regulations section 1.1411-3(e) for more

information and examples on the calculation of undistributed net

investment income.

A bankruptcy estate of an individual enters $125,000 and

uses Form 8960, lines 13–17, to compute the tax.

If you’re a U.S. citizen or resident married to an NRA, your

filing status is married filing separately unless you made an

election under section 6013(g) or 6013(h) to file jointly with your

Charitable deduction.Report the amount of net investment

income distributed to beneficiaries of the estate or trust and the

-20-

Instructions for Form 8960 (2023)

amount of net investment income allocated to distributions to

charity pursuant to section 642(c). The amount of the deduction

for net investment income distributed to charities under section

642(c) is the amount of the net investment income allocated to

the charity in accordance with Regulations section 1.642(c)-2(b)

and the allocation and ordering rules under Regulations section

1.662(b)-2. In the case of the S portion of an Electing Small

Business Trust, as defined by section 1361(e), report the amount

of net investment income distributed to beneficiaries of the

estate or trust and the amount of net investment income

allocated to distributions to charity pursuant to section 170. See

Section 641(c)(2)(E).

which the highest tax bracket begins for the tax year and enter

that amount here.

In the case of a QFT, see Special computational rules for

qualified funeral trusts (QFTs), earlier, to determine the amount

to report on Form 8960, line 19b.

Line 21—Net Investment Income Tax for Estates

and Trusts

Form 1041 filers: Include this amount on Form 1041,

Schedule G, line 5, and see the instructions there.

Form 1041, Schedule A, can be used as a worksheet to

Form 1041-QFT filers: Include this amount on Form

calculate the amounts of net investment income

TIP

1041-QFT, line 15, and see the instructions there.

allocable to charitable distributions by including on line 2

both tax-exempt income and the difference between adjusted

total income and the trust's net investment income (Form 8960,

line 18a).

Paperwork Reduction Act Notice.We ask for the information

on this form to carry out the Internal Revenue laws of the United

States. You are required to give us the information. We need it to

ensure that you are complying with these laws and to allow us to

figure and collect the right amount of tax.

The amount of the deduction for net investment income

distributed to beneficiaries should equal the sum of net

investment income reported to the beneficiaries on their

TIP

You are not required to provide the information requested on

a form that is subject to the Paperwork Reduction Act unless the

form displays a valid OMB control number. Books or records

relating to a form or its instructions must be retained as long as

their contents may become material in the administration of any

Internal Revenue law. Generally, tax returns and return

respective Schedules K-1 (Form 1041).

Note. In general, the deduction for distributions of net

investment income may not exceed the taxable income

distributed to the beneficiary for regular income tax purposes.

However, in the case of an estate or trust that owns an interest in

certain CFCs or PFICs, the distribution of net investment income

can exceed the distribution of taxable income when the amount

of distributions exceeds distributable net income for regular

income tax purposes.

information are confidential, as required by section 6103.

The time needed to complete and file this form will vary

depending on individual circ*mstances. The estimated average

time is:

Form 1041, Schedule B, can be used as a worksheet to

calculate the income distribution deduction for NIIT

purposes by replacing line 1 with the trust's net

TIP

Recordkeeping . . . . . . . . . . . . . .

Learning about

the law or the form. . . . . . . . . . .

1 hr., 01 min.

investment income (Form 8960, line 18a) and including on line 2

both adjusted tax-exempt interest and the difference between

line 1 and the trust's net investment income (Form 8960,

line 18a).

6 hr., 04 min.

1 hr., 47 min.

Preparing the form. . . . . . . . . . .

Copying, assembling,

and sending the form

to the IRS. . . . . . . . . . . . . . . . . .

20 min.

Line 18c—Undistributed Net Investment Income

Don’t enter a negative number. If negative, enter zero.

Comments and suggestions. We welcome your comments

about this publication and your suggestions for future editions.

Line 19a—Adjusted Gross Income (AGI)

You can send us comments through IRS.gov/

FormComments. Or, you can write to: Internal Revenue Service,

Tax Forms and Publications, 1111 Constitution Ave. NW,

IR-6526, Washington, DC 20224. DO NOT SEND THE FORM

TO THIS ADDRESS.

If the estate or trust doesn’t own a CFC or PFIC, enter its AGI for

regular income tax purposes.

If the estate or trust owns a CFC or PFIC, it may need to make

adjustments. See Line 13—Modified Adjusted Gross Income

(MAGI), earlier.

Although we can't respond individually to each comment

received, we do appreciate your feedback and will consider your

comments as we revise our tax forms, instructions, and

publications. We can't answer tax questions sent to the above

address.

Line 19b—Highest Tax Bracket for Estates and

Trusts

See the instructions for Form 1041, Schedule G, line 1a, and the

instructions for Form 1041-QFT, line 12, for the dollar amount at

-21-

Instructions for Form 8960 (2023)

Index

D

I

P

Deduction recoveries12

Definitions 1

Income Threshold, Estates and

Passive Activity3

Trusts 20

Income Thresholds, Individuals20

Index 22

R

Disposition of Interest4

Disposition of Property, gains and

Recordkeeping 1

losses 7

Individuals, application of Net

Investment tax2

S

Instruments or Commodities5

E

Section 129110

Economic Grouping4

Section 1411 Net Operating Loss11

Self-charged Interest14

J

Election for Reg 1.1411–10(g)5

Election, Form 881411

Joint-filed returns2

Elections for Investment Income5

T

M

Estates and Trusts, application of Net

Tax Computation19

Investment tax2

Mark-to-market, Passive Foreign

Expenses of Investments14

Investment Company10

-22-

Formulier 8960 Instructies | Instructies voor het invullen van formulieren (2024)
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