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Get your taxes done using TurboTax
Form 8960, line 7 would be the only good place to subtract the investment income, if you need to subtract it. Medicare tax is based on earnings. The NIIT is investment based. The question becomes who owns the investment income to determine if the investment income is split. Refer to your state law as it varies.
You are clearly aware of IRS pub 555 and its section on RDP which states:
The expenses for separate business or investment income is deductible by the RDP who earns the income.
If the income is split, so are the taxes, which would include NIIT. See pub 555 for relief from tax liability which states:
Relief from liability for tax attributable to an item of community income.
You aren't responsible for the tax relating to an omitted item of community income if all the following conditions are met.
- You didn't file a joint return for the tax year.
- You didn't include the item of community income in gross income.
- The item of community income you didn't include in your gross income is one of the following.
- Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee.
- Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor.
- Your spouse's (or former spouse's) distributive share of partnership income.
- Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Use the appropriate community property law to determine what is separate property.
- Any other income that belongs to your spouse (or former spouse) under community property law.
- You establish that you didn't know of, and had no reason to know of, that community income.
- Under all facts and circumstances, it wouldn't be fair to include the item of community income in your gross income.
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