Month: April 2022

If your tax bill was higher than anticipated, it could be due to the Net Investment Income Tax (NIIT). NIIT is a tax on investment income, such as interest, dividends, and capital gains. Importantly, it is a 3.8% surtax, meaning it is an extra tax on top of other taxes that may be owed on your investment income. For instance, qualified dividends and capital gains are generally taxed at 15%, but the rate for those subject to the NIIT will essentially be 18.8%. NIIT only applies if your modified adjusted gross income (MAGI) is more than a certain threshold - $200,000 (single taxpayer) or $250,000 (joint taxpayer). This is not a new tax - it has been in effect since 2013! Continue reading for more details.

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It might come as a surprise to learn that you’re technically an employer if you pay someone to watch your kids or to clean your home.  If a household worker is classified as your employee, you will owe tax, often referred to as the “nanny” tax. IRS guidelines for what makes a household worker an employee are pretty simple - if you control what work is performed and how they do it, they are employees. However, if the worker is an employee of an agency, the agency pays the tax, and if the worker is classified as an independent contractor, he/she is responsible for the tax. Keep reading to find out what is involved if you have a household employee and need to pay the nanny tax.

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