It depends. Here are some reasons why your Year 2 sale gain was taxed at NIIT when it wasn't in the year you sold it.
- Thresholds and Modified Adjusted Gross Income (MAGI): NIIT applies if your MAGI exceeds certain thresholds ($250,000 for married filing jointly, $200,000 for single filers, etc.). If your MAGI in Year 2 exceeded the threshold, the installment sale gain could have triggered the NIIT, even if it didn’t in the year of disposition.
- Installment Sale Timing: Installment sales spread the gain over multiple years, and each year’s portion is treated as income for that year. If your Year 2 income, including the installment gain, pushed you over the NIIT threshold, it could explain why it was taxed.
Check your Modified adjusted gross income for 2024. If it exceeds the threshold amounts listed above, this may be the reason you were subject to NIIT.
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