Do itemized deductions reduce Additional Medicare Tax or NIIT?
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Do itemized deductions reduce Additional Medicare Tax or NIIT?
I think the answer is no but having hard time confirming
Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
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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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
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.
Learn something new every day!
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.
Learn something new every day!
Last edited by dodecahedron on Thu Jul 30, 2020 9:10 am, edited 2 times in total.
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
Thank youdodecahedron 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.
Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
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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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
Thanks for pointing out this unusual exception. I have edited my post above to reflect the exception.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)
Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
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.
- dodecahedron
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
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.)
Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
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 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)
Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
Itemizing deductions is not implied, it is explicitly stated: "Any state income tax or investment interest expense taken as an itemized deduction..."the way wrote: ↑Thu Jul 30, 2020 11:40 amthis is implied, but just to be explicit, you have to itemize ...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)
And the original question was explicitly about itemized deductions.
Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
I agree and was not attempting to hijack the thread. I thought the use of "Additionally" was helpful but I guess maybe not.dodecahedron wrote: ↑Thu Jul 30, 2020 9:40 amYes, 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.)
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
Where is this statement found? In a "publication"? On form 8960? In the instructions for form 8960? If so, which page/section?
Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
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.boomer_techie wrote: ↑Tue Aug 04, 2020 5:46 amWhere is this statement found? In a "publication"? On form 8960? In the instructions for form 8960? If so, which page/section?
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Re: Do itemized deductions reduce Additional Medicare Tax or NIIT?
Oh, OK.
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.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.