Is the N.I.I.T. an Income Tax, a Social Security Tax, or Neither? Double Taxation of Income Hangs in the Balance

Volume 10 No 1    /    Read Article

By Wooyoung Lee and Nina Krauthamer

The Net Investment Income Tax (“N.I.I.T.”) applies to U.S. individuals, estates, and trusts. U.S. citizens who reside abroad are subject to N.I.I.T. in addition to U.S. income tax. They also may be subject to income tax and social security tax in their respective countries of residence. U.S. tax law provides no statutory relief from N.I.I.T. for such taxpayers. N.I.I.T. is due and the position of the I.R.S. is that the N.I.I.T. cannot be reduced by a foreign tax credit and cannot be eliminated by an applicable Social Security Totalization Agreement. How did Congress pass legislation that allows the I.R.S. to reach that result? Nina Krauthamer and Wooyoung Lee tell all, including recent taxpayer experience.  See more →