IRS Form 8960, officially known as “Net Investment Income Tax - Individuals, Estates, and Trusts,” is designed for taxpayers to calculate and report their Net Investment Income Tax (NIIT). The NIIT is a 3.8% tax on the lesser of the taxpayer’s net investment income or the amount by which their modified adjusted gross income exceeds certain threshold amounts which vary based on filing status, such as married filing jointly or single.
The purpose of Form 8960 is to ensure compliance with the tax provisions under the Affordable Care Act, which introduced the NIIT to help fund Medicare. The form is used by individuals, estates, and trusts to determine the amount of investment income subject to the tax, which includes interests, dividends, capital gains, rental and royalty income, and certain other passive activities.