NUA Overriding The 3.8% Net Investment Income Tax.

Romper — Tue, 23 Dec 2025 22:09:32 GMT

TurboTax Premier Desktop 2024 (2025 not yet functional) - Windows 11

Revision 12/23/25

2007 I retired and used the NUA option to transfer my shares of company stock from my 401k to my taxable brokerage account. I received a Form 1099-R and included the taxable amount/cost basis (Box 2a) in my 2007 return.
April 2025, I sold a number of shares from my brokerage account where the proceeds equaled the Gross Distribution (Box 1) on the 1099-R.
I reported that amount minus the cost basis (Box 2a) as a Long-Term Capital Gain (LTCG) in the TurboTax section titled Investment Income, Stock, Mutual Funds, etc.

Problem:

TurboTax includes the LTCG from the NUA shares in calculating the 3.8% Net Investment Income Tax (NIIT) on line 17 of Form 8960. This carries over to Form 1040SR, Line 23.
The LTCG from the shares of an NUA are not subject to the 3.8%. (Instructions for IRS 2024 Form 8960, Pg. 7).

Solution. It also passes the TurboTax Review and I can file electronically.

Open Form 8960 WORKSHEET and go to the Section For Line 5b.
On the bottom line titled "Net gain or loss from disposition of property not subject to net investment tax", enter the value of the NUA from Box 6 of your 1099-R.
This becomes a negative number on Form 8960, Line 5b.
The resulting NIIT calculation on Form 8960, Line 17 is correct and carries over to Form 1040SR, Line 23.
Entering the value anywhere else results in an error message during the review.

I invite your feedback...

Romper

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