What is the net investment income tax applicable to higher-income individuals?

The net investment income tax applicable to higher-income individuals is 3.8%. This tax is imposed on the lesser of an individual's net investment income or the amount by which their modified adjusted gross income exceeds certain threshold amounts. For single filers, this threshold is $200,000, and for married couples filing jointly, it is $250,000.

The tax is designed to apply to individuals with higher incomes who may derive significant income from investments such as interest, dividends, and capital gains. By imposing this tax, the government aims to help fund healthcare initiatives and ensure that wealthier individuals contribute fairly towards social programs.

This figure is important not only for taxpayer compliance but also for tax planning strategies among higher earners who might be affected by this tax. Understanding how this tax interacts with other income and tax systems is vital in effective financial planning and advising clients regarding their investments and income strategies.