Do itemized deductions reduce Additional Medicare Tax or NIIT?

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RocketShipTech
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Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by RocketShipTech »

I think the answer is no but having hard time confirming
jarjarM
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by jarjarM »

I think no based on looking through my own tax filing, but I'm sure the more experience tax experts will chime in.
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dodecahedron
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by dodecahedron »

Itemized deduction have zero effect on Additional Medicare Tax and NIIT. Both are based on MAGI, which can be defined in a variety of ways in different contexts, but none of the MAGI definitions are affected in any way by itemized deductions.

Edited to add: there is a special exception of which I was previously unaware. Some very specific types of itemized deductions can affect MAGI for NIIT. See MarkNYC´s post below for details.

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Last edited by dodecahedron on Thu Jul 30, 2020 9:10 am, edited 2 times in total.
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RocketShipTech
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by RocketShipTech »

dodecahedron wrote: Wed Jul 29, 2020 6:03 pm Itemized deduction have zero effect on Additional Medicare Tax and NIIT. Both are based on MAGI, which can be defined in a variety of ways in different contexts, but none of the MAGI definitions are affected in any way by itemized deductions.
Thank you
MarkNYC
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by MarkNYC »

Certain itemized deductions can reduce Net Investment Income Tax (NIIT). Any state income tax or investment interest expense taken as an itemized deduction and properly allocable to investment income can be deducted in arriving at Net Investment Income. (see Form 8960, part II)
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dodecahedron
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by dodecahedron »

MarkNYC wrote: Wed Jul 29, 2020 7:52 pm Certain itemized deductions can reduce Net Investment Income Tax (NIIT). Any state income tax or investment interest expense taken as an itemized deduction and properly allocable to investment income can be deducted in arriving at Net Investment Income. (see Form 8960, part II)
Thanks for pointing out this unusual exception. I have edited my post above to reflect the exception.
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OAG
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by OAG »

Additionally, EWP (Early Withdrawal Penalties) paid when CD's are redeemed early, can be used to reduce MAGI.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.
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dodecahedron
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by dodecahedron »

OAG wrote: Thu Jul 30, 2020 9:33 am Additionally, EWP (Early Withdrawal Penalties) paid when CD's are redeemed early, can be used to reduce MAGI.
Yes, but EWP are not *itemized* deductions. (Itemized deductions are specifically the ones that can only be claimed if you forgo the standard deduction. Non-itemized deductions, including EWP, can be taken in addition to the standard deduction.)
the way
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by the way »

MarkNYC wrote: Wed Jul 29, 2020 7:52 pm Certain itemized deductions can reduce Net Investment Income Tax (NIIT). Any state income tax or investment interest expense taken as an itemized deduction and properly allocable to investment income can be deducted in arriving at Net Investment Income. (see Form 8960, part II)
this is implied, but just to be explicit, you have to itemize and also the income tax deduction is capped at 10k. (however, I've read that different tax s/w may handle this differently).
MarkNYC
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by MarkNYC »

the way wrote: Thu Jul 30, 2020 11:40 am
MarkNYC wrote: Wed Jul 29, 2020 7:52 pm Certain itemized deductions can reduce Net Investment Income Tax (NIIT). Any state income tax or investment interest expense taken as an itemized deduction and properly allocable to investment income can be deducted in arriving at Net Investment Income. (see Form 8960, part II)
this is implied, but just to be explicit, you have to itemize ...
Itemizing deductions is not implied, it is explicitly stated: "Any state income tax or investment interest expense taken as an itemized deduction..."

And the original question was explicitly about itemized deductions.
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OAG
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by OAG »

dodecahedron wrote: Thu Jul 30, 2020 9:40 am
OAG wrote: Thu Jul 30, 2020 9:33 am Additionally, EWP (Early Withdrawal Penalties) paid when CD's are redeemed early, can be used to reduce MAGI.
Yes, but EWP are not *itemized* deductions. (Itemized deductions are specifically the ones that can only be claimed if you forgo the standard deduction. Non-itemized deductions, including EWP, can be taken in addition to the standard deduction.)
I agree and was not attempting to hijack the thread. I thought the use of "Additionally" was helpful but I guess maybe not.
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by boomer_techie »

MarkNYC wrote: Thu Jul 30, 2020 12:47 pm Itemizing deductions is not implied, it is explicitly stated: "Any state income tax or investment interest expense taken as an itemized deduction..."
Where is this statement found? In a "publication"? On form 8960? In the instructions for form 8960? If so, which page/section?
MarkNYC
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by MarkNYC »

boomer_techie wrote: Tue Aug 04, 2020 5:46 am
MarkNYC wrote: Thu Jul 30, 2020 12:47 pm Itemizing deductions is not implied, it is explicitly stated: "Any state income tax or investment interest expense taken as an itemized deduction..."
Where is this statement found? In a "publication"? On form 8960? In the instructions for form 8960? If so, which page/section?
This is a quote of my own statement earlier in this thread. The instructions to Form 8960, Part II provide a more lengthy and detailed explanation of which itemized deductions actually deducted on the tax return can also be deducted in the computation of Net Investment Income.
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?

Post by boomer_techie »

MarkNYC wrote: Tue Aug 04, 2020 8:46 am This is a quote of my own statement earlier in this thread.
Oh, OK.
The instructions to Form 8960, Part II provide a more lengthy and detailed explanation of which itemized deductions actually deducted on the tax return can also be deducted in the computation of Net Investment Income.
I asked because the 8960 instructions, to my thinking, never explicitly require itemizing deductions before the relevant ones can be applied against income subject to NIIT. I've grudgingly accepted the Internet's wisdom that itemizing is required. Had I been able to apply state taxes, I'd have been able to reduce my 2019 NIIT by $51. To my mind I did deduct them, but because the SALT limit is lower than the standard deduction, apparently I'm deemed to not have deducted them.
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