Will you be on the hook? Tackling the new Medicare tax and rental activities

Description

Abstract: The new 3.8% net investment income tax (NIIT), also known as the Medicare contribution tax, gives some taxpayers with rental income yet another reason to seek status as a “real estate professional.” This article gives examples of net investment income and explains that those who qualify as a real estate professional and materially participate in the business can offset nonpassive income with rental losses. A sidebar explains how taxpayers who own multiple rental properties can establish material participation.