Net Investment Income and Additional Medicare Tax
Learn the decision pattern the exam can test, then apply it to a realistic taxpayer fact pattern.
What changes the answer?
Wages can trigger Additional Medicare Tax but are not net investment income; passive investment items can produce the reverse result.
A tax-practice scenario
A high-income taxpayer has wages, rental income, and capital gains. Put each item into the correct tax base before applying limits.
Identify the taxpayer, entity, transaction, and tax period first. Write the controlling tests in order, apply only the relevant facts, and keep the reporting result separate from any planning recommendation.
Do not take this shortcut.
Combining both taxes into a single high-income surcharge calculation.
Turn the rule into recall.
Make two parallel worksheets labeled earned compensation and net investment income.
- ExplainState the governing distinction without notes.
- ApplyChange one fact in the scenario and predict the new result.
- RetrieveAnswer an unseen question, then review every option.
Official source and scope
This lesson follows the current PSI content outline and uses the IRS reference below for the underlying tax or practice framework. Always confirm current forms, instructions, thresholds, and effective dates before advising a taxpayer.