@marcschare - NIIT is 3.8% tax on the unearned incomes that exceeds $200,000. social security is NOT multipled by the 3.8%, but it can "push" unearned income above $200,000.
Let's use an example. Iet's say (and I am exaggerating to prove the point) that I have $160,000 of social security gross income (this is 85% of what I received for the year) and I have $40,000 of dividends and that is all!
The NIIT tax is zero - becase my MAGI is $200,000 less $200,000 as the thresshold so that is zero.
Now, let's say, the social security income is at $170,000 and the dividends remain at $40,000.
THe NIIT tax is the lessor of:
$40,000 (my unearned income)
or
$210,000 (MAGI) - $200,000 (Thresshold) = $10,000
So NIIT is $10,000*3.8%. or $380.
Yes, social security income is part of MAGI and it can "push" more of the unearned income beyond $200,000, but the 3.8% is never multipled by social security.
One more similar example: my social socurity income is $210,000 and my dividends are STILL $40,000
The NIIT tax is the lessor of:
$40,000 (my unearned income)
or
$250,000 (MAGI) - $200,000 (Thresshold) = $50,000
So NIIT is $40,000*3.8%. or $1520.
and no matter how much higher my social secuity goes, NIIT will still be $1520.
taht is because Social Security income is not part of NIIT 😀
