Instructions for Form 8960

2025

Instructions for Form 8960

Net Investment Income Tax—Individuals, Estates, and Trusts

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 8960 and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form8960.

General Instructions

Reminders

Digital assets. Income derived from transactions

involving digital assets may be subject to the tax imposed

on net investment income (NII) under section 1411(a),

which applies in addition to other income taxes imposed

under subtitle A of the Code.

Charitable contribution deduction for electing small

business trusts (ESBTs). Line 18b of Form 8960 was

updated to reflect changes outlined in P. L. 115-97,

section 13542, that amended the way the S portion of an

ESBT accounts for charitable contribution deductions

under section 170(b) instead of section 641(c), effective

January 1, 2018. See Line 18b Deductions for

Distributions of Net Investment Income and Charitable

Deductions.

Schedule SE (Form 1040) income. Income taken into

account in determining self-employment income subject

to tax under section 1401(b) is specifically excluded from

NIIT under section 1411(c)(6). This doesn’t include

income that is excepted from net earnings from

self-employment (NESE) under section 1402(a)(1)

through 1402(a)(17). This income is subject to NIIT. See

Special Rule for Self-employed Individuals.

Trade or business income subject to net investment

income tax (NIIT). Line 4a of Form 8960 includes total

income reported on Schedules C, E, and F (Form 1040)

that is potentially subject to NIIT.

These instructions are based mostly on Regulations

sections 1.1411-1 through 1.1411-10.

Who Must File

Attach Form 8960 to your return if your modified adjusted

gross income (MAGI) is greater than the applicable

threshold amount.

Purpose of Form

Use Form 8960 to figure the amount of your Net

Investment Income Tax (NIIT).

Feb 4, 2026

Definitions

Controlled foreign corporation (CFC). Generally, a

CFC is any foreign corporation if more than 50% of its

voting power or stock value is owned or considered

owned by U.S. shareholders (as defined in section 951(b))

on any day during the tax year. Certain foreign insurance

companies are considered CFCs if more than 25% of their

voting power or stock value is owned or considered

owned by U.S. shareholders (as defined in section 951(b))

on any day during the tax year. See sections 957(a) and

(b). Additionally, certain foreign insurance companies with

related person insurance income may be CFCs. See

section 953(c). A specified foreign corporation described

in section 965(e)(1)(B) and Regulations section 1.965-1(f)

(45)(i)(B) that is not otherwise a CFC is treated as a CFC

for purposes of Regulations section 1.1411-10. See

Regulations section 1.965-1(d).

Excluded income. “Excluded income” means:

• Income excluded from gross income in chapter 1 of the

Internal Revenue Code;

• Income not included in NII; and

• Gross income and net gain specifically excluded by

section 1411, related regulations, or other guidance

published in the Internal Revenue Bulletin.

Examples of excluded items are:

• Wages,

• Unemployment compensation,

• Alaska Permanent Fund Dividends,

• Alimony,

• Social security benefits,

• Tax-exempt interest income,

• Income from certain qualified retirement plan

distributions, and

• Income subject to self-employment taxes. See Special

Rule for Self-employed Individuals, later.

Net investment income. Generally, NII includes gross

income from interest, dividends, annuities, royalties, and

rents, unless they’re derived from the ordinary course of a

trade or business that isn’t (a) a passive activity, or (b) a

trade or business of trading in financial instruments or

commodities. In addition, NII includes other gross income

derived from a trade or business that’s (a) a passive

activity, or (b) a trade or business of trading in financial

instruments or commodities. Additionally, NII includes net

gain (to the extent taken into account in computing taxable

income) attributable to the disposition of property other

than property held in a trade or business that’s not (a) a

passive activity, or (b) a trade or business of trading in

financial instruments or commodities. To arrive at NII, the

above items are reduced by deductions allowed against

the income tax that are properly allocable to those items of

gross income or net gain. See section 1411(c) and

Regulations sections 1.1411-4 and 1.1411-10(c).

Instructions for Form 8960 (2025) Catalog Number 53783S

Department of the Treasury Internal Revenue Service www.irs.gov

Passive foreign investment company (PFIC).

Generally, a PFIC is any foreign corporation if at least 75%

of its gross income is passive income or an average of at

least 50% of its assets produce passive income or are

held for the production of passive income. See section

1297(a).

Qualified electing fund (QEF). Generally, a QEF is a

PFIC for which the taxpayer has made an election under

section 1295(b) and the PFIC complies with IRS

requirements for determining ordinary earnings and net

capital gain. See section 1295(a).

Section 1.1411-10(g) election. An election made under

Regulations section 1.1411-10(g) (section 1.1411-10(g)

election). See Regulations Section 1.1411-10(g) Election,

later.

Section 1411 trade or business. Generally, a trade or

business that’s either a passive activity for the taxpayer or

is a trade or business of trading in financial instruments or

commodities. See section 1411(c)(2) and Regulations

section 1.1411-5(a).

Recordkeeping

For the NIIT, certain items of investment income and

investment expense receive different treatment than for

the regular income tax. Therefore, you need to keep all

records and worksheets for the items you need to include

on Form 8960. Keep all records for the entire life of the

investment to show how you calculated basis. You’ll need

to know what you did in prior years if the investment was

part of a carryback or carryforward.

Application to Individuals

U.S. citizens and residents. Individuals who have for

the tax year (a) MAGI that’s over an applicable threshold

amount, and (b) NII, must pay 3.8% of the smaller of (a) or

(b) as their NIIT.

The applicable threshold amount is based on your filing

status.

• Married filing jointly or Qualifying surviving spouse is

$250,000.

• Married filing separately is $125,000.

• Single or Head of household is $200,000.

Nonresidents. The NIIT doesn’t apply to nonresident

alien (NRA) individuals. If you’re a U.S. citizen or resident

married to an NRA, your filing status will be married filing

separately for purposes of determining your MAGI, NII,

and whether you’re subject to the NIIT. However, see

Election To File Jointly With Nonresident Spouse, later,

about certain elections to file jointly with an NRA spouse.

Dual-resident individual. If you’re a dual-resident

individual, within the meaning of Regulations section

301.7701(b)-7(a)(1), you’ll generally be treated as a U.S.

resident for purposes of the NIIT. However, you’ll be

treated as an NRA for purposes of the NIIT if:

• You determine you would be treated as a resident of a

foreign country for purposes of an income tax treaty

between the United States and that foreign country;

• You elect to be treated as a resident of the foreign

country for purposes of computing your U.S. income tax

liability; and

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• You file Form 1040-NR, U.S. Nonresident Alien Income

Tax Return, and Form 8833, Treaty-Based Return Position

Disclosure Under Section 6114 or 7701(b), as provided in

Regulations section 301.7701(b)-7(b).

Dual-status individual. If you were a dual-status

individual—that is, an individual who was a resident of the

United States for part of the year and an NRA for the other

part of the year—you’re subject to the NIIT only for the

portion of the year you were a U.S. resident. The relevant

threshold amount isn’t reduced or prorated for a

dual-status individual.

If you were a U.S. resident on the last day of the tax

year, file Form 1040 or 1040-SR and attach a statement

showing your income for the part of the year you were a

nonresident. You can use Form 1040-NR as the

statement.

If you were a nonresident on the last day of the tax year,

file Form 1040-NR and attach a statement showing your

income for the part of the year you were a U.S. resident.

You can use Form 1040 or 1040-SR as the statement.

For more information, see the Instructions for Form

1040-NR and Pub. 519, U.S. Tax Guide for Aliens.

Election To File Jointly With Nonresident

Spouse—Section 6013(g) or 6013(h)

If you and your spouse elect to file a joint return under

section:

• 6013(g) (where an NRA is married to a U.S. citizen or

resident at the end of the tax year); or

• 6013(h) (where at least one spouse was an NRA at the

beginning of the tax year, but is a U.S. citizen or resident

married to a U.S. citizen or resident at the end of the tax

year),

you can also elect to apply the joint return election for NIIT

purposes. The election must be made for the first tax year

in which the U.S. taxpayer is subject to NIIT.

To make either election under section 6013(g) or

section 6013(h), for NIIT purposes, use your combined

items of income, gain, loss, and deduction from your joint

return to figure your NII and MAGI; use the married filing

jointly return applicable threshold amount ($250,000); and

check the appropriate checkbox near the top of Form

8960, Part I.

Once you make either election, its duration and

termination are governed by sections 6013(g) and

6013(h), respectively, and related regulations.

You can make either election on an amended return

only if the tax year for which you’re making the election,

and all tax years affected by the election, aren’t closed by

the period of limitations on assessment under section

6501. The election is effective for the year made and all

subsequent years until revoked, terminated, or

suspended.

Either spouse can revoke the election. If either spouse

dies, termination occurs but is delayed if the surviving

spouse qualifies as a qualifying surviving spouse entitled

to use the joint return rates under section 6013(g)(4)(B).

Termination occurs if the spouses become legally

separated or divorced. If neither spouse is a U.S. citizen or

resident at any time during a later tax year, suspension

occurs.

Instructions for Form 8960 (2025)

The IRS can terminate the election if either spouse fails

to keep required books and records or denies access to

applicable books and records, or fails to submit other

requested information relative to the correct amount of tax.

If you elect to apply a section 6013(g) election for NIIT

purposes and later determine that you didn’t meet the

criteria for doing so in that tax year, your election for NIIT

purposes will have no effect that year and for all future

years. However, if, in a later year, you meet the criteria to

elect to apply your section 6013(g) election for NIIT

purposes, you’ll be treated as though you did elect to

apply your section 6013(g) election in that later year

unless you file (or amend) your return for that later year to

report your NIIT without the election for NIIT purposes.

Filing separately with nonresident spouse for NIIT

purposes. If you made a section 6013(g) or 6013(h)

election to file a joint return for regular income tax

purposes, but don’t elect to apply the joint return election

for NIIT purposes, then, for NIIT purposes, you’ll be

treated under the default method as married filing

separately. Default treatment for a U.S. citizen or resident

married to an NRA treats the U.S. citizen as married filing

separately for purposes of the NIIT. The U.S. citizen or

resident spouse figures his or her NII and MAGI

separately and uses the applicable threshold for married

filing separately ($125,000).

Application to Estates and Trusts

Domestic estates and trusts. The NIIT applies to

estates and trusts that have undistributed NII and adjusted

gross income (AGI) in excess of the threshold amount.

The NIIT is 3.8% of the lesser of:

• The undistributed NII for the tax year; or

• The excess, if any, of AGI (as defined in section 67(e))

over the applicable threshold amount.

The applicable threshold amount is the dollar amount at

which the highest tax bracket in section 1(e) begins for the

tax year. See the instructions for Form 1041, Schedule G,

line 1a, and the instructions for Form 1041-QFT, line 12,

for the dollar amount at which the highest tax bracket

begins for the tax year.

Exception for certain domestic trusts. The following

trusts aren’t subject to the NIIT.

• Trusts that are exempt from income taxes imposed by

subtitle A of the Internal Revenue Code.

1. Charitable trusts and qualified retirement plan trusts

exempt from tax under section 501.

2. Charitable remainder trusts exempt from tax under

section 664.

• A trust or decedent’s estate in which all of the unexpired

interests are devoted to one or more of the purposes

described in section 170(c)(2)(B).

• Trusts that are classified as “grantor trusts” under

sections 671–679.

• Electing Alaska Native Settlement Funds (described in

section 646).

• Perpetual care (cemetery) trusts (described in section

642(i)).

• Trusts that aren’t classified as “trusts” for federal income

tax purposes, for example:

1. Real estate investment trusts, and

Instructions for Form 8960 (2025)

2. Common trust funds.

Special computational rules for qualified funeral

trusts (QFTs). The NIIT applies to the QFT (as defined in

section 685) by treating each beneficiary’s interest in that

beneficiary’s contract as a separate trust. Complete one

consolidated Form 8960 for all beneficiary contracts

subject to NIIT.

If a QFT has one or more beneficiary contracts that

have NII in excess of the threshold amount:

• Complete Form 8960, lines 1–12, using only the sum of

the NII of the beneficiary contracts that have NII in excess

of the threshold amount; and

• On line 19b:

1. Insert the number of beneficiary contracts that have

NII in excess of the threshold amount next to the entry on

the line, and

2. Multiply the number of beneficiary contracts that

have NII in excess of the threshold amount by the

threshold amount for the year and enter that amount on

line 19b.

Example. For 2025, a QFT has a beneficiary contract

with $16,000 of interest income and another beneficiary

contract with $21,000 of dividend income. Neither contract

has any properly allocable deductions. The threshold

amount for the 2025 tax year is $15,650. Therefore, the

QFT has two beneficiary contracts with NII in excess of

the threshold amount for the year.

The QFT will report $16,000 on line 1 (interest) and

$21,000 on line 2 (dividends). Lines 12, 18a, and 19

would each be $37,000 ($16,000 plus $21,000). Enter “2”

on the dotted line at the end of line 19b and enter $31,300

($15,650 × 2) on the entry line for 19b. Lines 19c and 20

will be $5,700 ($37,000 less $31,300). On line 21, enter

the NIIT liability of $216.60 ($5,700 × 3.8% (0.038)).

Special computational rules for electing small business trusts (ESBTs). The NIIT has special

computational rules for ESBTs. In general, ESBTs

compute their NIIT in 3 steps.

1. The ESBT separately calculates the undistributed

NII of the S portion and non-S portion according to the

general rules for trusts under chapter 1 of the Code, and

then combines the undistributed NII of the S portion and

the non-S portion. In the case of an ESBT that has an S

portion and a non-S portion, complete lines 1–11 of Form

8960 using the items from the non-S portion, and add

undistributed NII of the S portion to NII on line 7.

2. The ESBT determines its AGI, solely for purposes of

NIIT, by adding the net income or net loss from the S

portion to the AGI of the non-S portion as a single item of

income or loss. See the instructions for Line 19a for more

information.

3. To determine whether the ESBT is subject to NIIT,

the ESBT compares the combined undistributed NII with

the excess of its AGI over the section 1(e) threshold.

For an ESBT with only S corporation income (no

TIP non-S portion), complete Form 8960 using the

items from the S portion. For ESBTs with an S

portion and a non-S portion, use Form 8960 as a

worksheet for calculating the amounts to enter on line 7

and line 19a. On the S portion’s Form 8960 worksheet,

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enter the S portion’s NII on line 7 of the trust’s Form 8960

and combine line 19a of the Form 8960 worksheet with

the non-S portion’s AGI to arrive at the amount on

line 19a.

See Regulations section 1.1411-3(c) for more details

and examples.

Special computational rules for bankruptcy estates

of an individual. A bankruptcy estate of an individual

debtor is treated as an individual for purposes of the NIIT.

Regardless of the actual marital status of the debtor, the

applicable threshold for purposes of determining the NIIT

is the amount applicable for a married person filing

separately.

Distributions from foreign estates and foreign trusts.

If you’re a U.S. person who receives a distribution of

income from a foreign estate or foreign trust, you must

generally include the distribution in your NII calculation to

the extent that the income is included in your AGI for

regular income tax purposes. However, you don’t need to

include any distributions of accumulated income that you

receive from a foreign trust.

Note: The NIIT doesn’t apply directly to foreign estates or

foreign trusts.

Passive Activity

General Rules

NII generally includes income and gain from passive

activities. A passive activity for purposes of NII has the

same meaning as under section 469. A passive activity

includes any trade or business in which you don’t

materially participate. A passive activity also includes any

rental activity, regardless of whether you materially

participate. There are limited exceptions for rentals. See

the discussion on rentals, later. For more details on

passive activities, see the Instructions for Form 8582,

Passive Activity Loss Limitations; and Pub. 925, Passive

Activity and At-Risk Rules.

Trade or Business Activities

The definition of trade or business for NIIT purposes is

limited to a trade or business within the meaning of

section 162. This is more restrictive than the definition of a

trade or business activity for purposes of the passive

activity loss rules. For example, under the passive activity

loss rules, a trade or business includes any activity

conducted in anticipation of the commencement of a trade

or business and any activity involving research or

experimentation. In some cases, income from activities

that aren’t passive activities under section 469 will be

included in NII because the activity doesn’t rise to the level

of a trade or business within the meaning of section 162.

The activity must be a trade or business within the

meaning of section 162 and be nonpassive for purposes

of section 469 before the income is excluded from the NIIT

(with the exception of a trade or business of trading in

financial instruments or commodities under section

1411(c)(2)(B)). If you own an interest in a pass-through

entity, the determination of whether that’s a trade or

business is made at that entity’s level.

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Real Estate Professionals

If you’re a real estate professional for purposes of section

469(c)(7), your rental income or loss won’t be passive if

you materially participated in the rental real estate activity

with certain restrictions. See Safe Harbor for Real Estate

Professionals, below.

However, your rental income is included in NII if the

income isn’t derived in the ordinary course of a trade or

business. Qualifying as a real estate professional doesn’t

necessarily mean you’re engaged in a trade or business

with respect to the rental real estate activities. If your

rental real estate activity isn’t a section 162 trade or

business or you don’t materially participate in the rental

real estate activities, the rental income will be included in

NIIT.

For additional information on real estate professionals,

see section 469(c)(7) and Pub. 925.

Safe Harbor for Real Estate Professionals

You qualify for the safe harbor if you’re a real estate

professional for purposes of section 469 and you:

• Participate in each rental real estate activity for more

than 500 hours during the tax year, or

• Participated in a rental real estate activity for more than

500 hours in any 5 tax years (whether or not consecutive)

during the 10 tax years immediately prior to this tax year.

If you qualify, your gross rental income from your rental

real estate activity is treated as though derived in the

ordinary course of a trade or business and isn’t included in

your NII. If you qualify in the year you dispose of the

property used in the rental real estate activity, the amount

of gain or loss from the disposition is also deemed to be

derived from property used in the ordinary course of a

trade or business and isn’t included in your NII.

Note: For real estate professionals with a Regulations

section 1.469-9(g) election in effect, all of your rental real

estate activities constitute a single activity for purposes of

applying the 500-hour test described under Safe Harbor

for Real Estate Professionals above.

Note: If you’re a real estate professional under section

469(c)(7), but you’re unable to satisfy the qualifications for

the safe harbor, you’re not precluded from establishing

that the gross income and gain or loss from the disposition

of property associated with your rental real estate activity

aren’t included in NII.

Special Rules for Certain Rental Income

For income tax purposes, Regulations section 1.469-2(f)

(6) generally recharacterizes what would otherwise be

passive rental income from a taxpayer’s property as

nonpassive where the taxpayer rents the property for use

in a trade or business in which the taxpayer materially

participates and the use of the rental property is not

incidental to development activity.

Similarly, for income tax purposes, a rental activity

that’s properly grouped with a trade or business activity in

which the taxpayer materially participates under

Regulations section 1.469-4(d)(1) is a nonpassive activity.

For purposes of calculating your NII, the gross rental

income in both of these situations is treated as though it’s

Instructions for Form 8960 (2025)

derived in the ordinary course of a trade or business.

Further, upon the disposition of the assets associated with

the rental activity, any gain or loss is also treated as gain

or loss attributable to the disposition of property held in a

nonpassive trade or business and not included in your NII.

For these purposes, the nonpassive trade or business

can’t be a business trading in financial instruments or

commodities.

Special Rules for Certain Farming Operations

Net income from a farm that is actively managed, for

example, where the owners meet material participation

tests, is not subject to NIIT. Farm income from a passive

activity is subject to the tax under section 1411(c)(2).

However, income taken into account in figuring

self-employment income that is subject to tax under

section 1401(b) is not subject to NIIT. See Special Rule for

Self-employed Individuals, later.

Treatment of Former Passive Activities

A former passive activity is any activity that was a passive

activity in a prior tax year but isn’t a passive activity in the

current year. A prior tax year’s unallowed loss from a

former passive activity is allowed to the extent of

current-year income from the activity under section 469(f)

(1)(A). For purposes of determining your NII, suspended

losses from former passive activities are allowed as a

properly allocable deduction, but only to the extent the net

income or net gain from the former passive activity is

included in your NII. Any remaining suspended losses

from the former passive activity are allowed as a properly

allocable deduction, but only to the extent the net income

or net gain from other passive activities is included in your

NII. For more information, see Regulations section

1.1411-4(g)(8) and examples.

Disposition of Entire Interest

If you disposed of your entire interest in a passive activity

or a former passive activity to an unrelated person in a

fully taxable transaction, your losses allocable to the

activity for that year aren’t limited by the passive activity

loss rules for income tax purposes. A fully taxable

transaction is a transaction in which you recognize all

realized gain or loss. For purposes of calculating your NII,

these losses may be properly allocable deductions,

depending on the underlying character and origin of the

losses.

Note: If you dispose of an activity that’s always been a

passive activity, the suspended passive losses from that

activity are allowed in full as a properly allocable

deduction.

Note: If you dispose of an activity that’s a former passive

activity, any suspended passive losses allowed in the year

of disposition by reason of section 469(f)(1)(A) are

included as properly allocable deductions, but only to the

extent the gain on the disposition of the activity is included

in NII (before taking into account any suspended losses).

Any suspended passive losses that are allowed by reason

of section 469(g) are allowed as additional properly

allocable deductions.

Instructions for Form 8960 (2025)

Economic Grouping

You can treat one or more trade or business activities, or

rental activities, as a single activity if those activities form

an appropriate economic unit for measuring gain or loss

under the passive activity loss rules. For additional

information on passive activity grouping rules, see Pub.

925.

Regrouping rules. The passive activity grouping rules

determine the scope of your trade or business and

whether that trade or business is a passive activity for

purposes of the NIIT. The proper grouping of a rental

activity with a trade or business activity won’t generally

convert any gross income from rents into gross income

derived from a trade or business.

Generally, you may not regroup activities unless your

grouping was clearly inappropriate when originally made,

or has become clearly inappropriate because of changed

facts and circumstances.

However, under the NIIT “fresh start” election, you may

regroup for the first tax year you’re subject to the NIIT

(without the effect of the regrouping). You may regroup

only once under this election and that regrouping will

apply to the tax year for which you regroup and all future

tax years. If you’re subject to the NIIT for 2013 and you

don’t regroup, you may make the election for the first tax

year beginning after 2013 that you’re subject to the NIIT.

You may regroup on an amended return, but only if you

weren’t subject to the NIIT on your original return (or

previously amended return), and if, because of a change

to the original return, you owe NIIT for the year. For

additional rules regarding regrouping on amended returns,

see Regulations section 1.469-11(b)(3)(iv)(C).

Disclosure requirements. Regroupings under the NIIT

“fresh start” election are subject to the disclosure

requirements of Rev. Proc. 2010-13.

Disposition of Partnership Interest or

S Corporation Stock

In general, an interest in a partnership or S corporation

isn’t property held for use in a trade or business and,

therefore, gain or loss from the sale of a partnership

interest or S corporation stock is included in your NII.

Adjustment

The amount of the gain or loss from the disposition for

regular income tax purposes is included on Form 8960,

line 5a, as a gain or loss. If you materially participated (as

defined under the passive activity loss rules) in a trade or

business activity of the partnership or S corporation (or

one of its subsidiaries) and that trade or business activity

isn’t the trade or business of trading in financial

instruments or commodities, then you must calculate the

adjustment to report on line 5c. The adjustment described

below only applies to dispositions of equity interests in

partnerships and stock in S corporations and doesn’t

apply to gain or loss recognized on, for example,

indebtedness owed to the taxpayer by a partnership or S

corporation.

For more information on how to calculate the

adjustment to report on line 5c, see Proposed Regulations

section 1.1411-7.

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Note: If the tax basis of the interest in the partnership or S

corporation for NIIT purposes is different than for regular

income tax purposes due to certain adjustments

associated with income from CFCs or QEFs, the amount

of gain or loss may exceed the amount reported for

regular income tax purposes.

Required statements. Attach a statement to your return

for the year of disposition. Your statement must include:

• The name and taxpayer identification number of the

partnership or S corporation of which the interest was

transferred,

• The amount of the transferor’s gain or loss on the

disposition of the interest for regular income tax purposes

included on line 5a,

• The information provided by the partnership or S

corporation to the transferor relating to the disposition (if

any), and

• The amount of adjustment to gain or loss due to basis

adjustments attributable to ownership in certain CFCs and

QEFs.

Deferred recognition sales (installment sales and private annuities). If you disposed of a partnership interest

or S corporation stock in an installment sale transaction to

which section 453 applies, you need to calculate your

adjustment to net gain in the year of the disposition, even

if the disposition occurred prior to 2013. The difference

between the amount reported for regular income tax and

NIIT will be taken into account when each payment is

received. You must attach the statement described above

to your return in the first year you’re subject to NIIT. In

subsequent years, attach a statement to your return that

provides “Adjustment relates to a deferred recognition sale

first reported on line 5c of the (enter year) return.”

Regulations Section 1.1411-10(g)

Election

In general, you may make the election provided in section

1.1411-10(g) if you own stock of a CFC or QEF. If a

section 1.1411-10(g) election is in effect for stock of a

CFC or QEF, generally, the amounts you include in income

for regular income tax purposes under sections 951,

951A, and 1293 from the stock of the CFC or QEF are

included in NII, and distributions from the stock of the CFC

or QEF, described in section 959(d) or 1293(c), are

excluded from NII.

Your election applies only to the specific stock of the

CFC or QEF for which it’s made and stock of the CFC or

QEF that you subsequently acquire. If you own a CFC or

QEF through certain domestic pass-through entities, such

as a domestic partnership, the entity may make the

election for the stock of the CFC or QEF and you’ll be

considered as having made the election with respect to

the stock of the CFC or QEF owned or subsequently

acquired by the pass-through entity. The election by the

pass-through entity applies only to stock of the CFC or

QEF held or subsequently acquired directly or indirectly

by the pass-through entity. The pass-through entity’s

election doesn’t apply to any stock of the CFC or QEF that

you personally hold or subsequently acquire. If the entity

doesn’t make the election, you may make the election for

the stock of the CFC or QEF owned through the entity.

6

Timing of election. Your election applies to the tax year

for which it’s made and later tax years, and applies to all

interests in the CFC or QEF that you later acquire. You

can’t revoke the election. In general, the election must be

made no later than the first tax year beginning after 2013,

in which you include an amount in income for regular

income tax purposes under section 951(a), 951A, or

1293(a) for the stock of the CFC or QEF, and are subject

to NIIT or would be subject to NIIT if you made the

election for the stock of the CFC or QEF. The election may

be made for a tax year beginning before 2014. The

election can be made on an original or an amended

return, provided that the tax year for which the election is

made, and all tax years affected by the election, aren’t

closed by the period of limitations on assessment under

section 6501. For more information, see Regulations

section 1.1411-10(g).

Example. If, in 2025, a single individual acquires stock

in a QEF, has a QEF inclusion of $5,000, and has MAGI of

$150,000, the individual wouldn’t have to make a section

1.1411-10(g) election for 2025 because section 1411 isn’t

applicable. If, in 2026, the individual has MAGI in excess

of $200,000, and the individual would like to take QEF

inclusions into account for purposes of section 1411 in the

same manner and in the same tax year as those amounts

are taken into account for Code chapter 1 purposes, the

individual must make the section 1.1411-10(g) election for

2026 in the time and manner described in Regulations

section 1.1411-10(g).

Content requirements of election. If you’re making or

made the election in a prior year, you must check the

checkbox for “section 1.1411-10(g) election” on the Form

8960 filed with your original or amended return. In

addition, you must attach a statement to your return,

which includes the following.

• Your name and social security number (individuals) or

employer identification number (EIN) (estates and trusts).

• The following information for each CFC or QEF for

which an election is made.

1. The name of the CFC or QEF.

2. Either the EIN of the CFC or QEF, or, if the CFC or

QEF doesn’t have an EIN, the reference ID number of the

CFC or QEF.

In addition, list separately each CFC or QEF for which an

election is being made for the first time with this return and

include on the statement a declaration that you elect

under section 1.1411-10(g) to apply the rules in

Regulations section 1.1411-10(g).

Special Rule for Traders in Financial

Instruments or Commodities

Gains and losses from your trade or business of trading in

financial instruments or commodities aren’t subject to

self-employment taxes. However, interest expense and

other investment expenses are deducted by a trader on

Schedule C (Form 1040), Profit or Loss From Business, if

the expenses are from the trading business. A special rule

may apply to a trader in financial instruments or

commodities to reduce NII. The trader’s interest and other

investment expenses, to the extent the expenses aren’t

Instructions for Form 8960 (2025)

used to reduce the trader’s self-employment income, may

be deductible for NIIT.

• Form 1040-NR, taxable interest received for period of

U.S. residency shown on attached statement.

Special Rule for Self-employed

Individuals

See Special computational rules for qualified funeral

trusts (QFTs) and Dual-status individual, earlier.

NII doesn’t include any item taken into account in

determining self-employment income subject to tax under

section 1401(b) for the tax year. See section 1411(c)(6).

This includes income from farming and nonfarming

activities that is subject to self-employment tax under

section 1401(b). See the Instructions for Schedule SE

(Form 1040).

Included in figuring income from self-employment are

income and allowable deductions in figuring net income

from self-employment. Amounts reported to a general or

limited partner in a partnership should include the amount

of net earnings from self-employment reported on your

Schedule K-1 (Form 1065). However, income that is

excepted from self-employment, described in sections

1402(a)(1) through (17), is included in NII if described in

Regulations section 1.1411-4. Certain types of income

excluded from self-employment tax, such as capital gains

and other items specifically excluded from

self-employment income under section 1402(a), are

included in NII if the income otherwise meets the definition

of NII. See, generally, Regulations section 1.1411-9.

Example. If an individual taxpayer has $90,000 of

trade or business income, but $1,000 of the income is

attributable to the sale of a capital asset (which is

excluded from net earnings from self employment under

section 1402(a)(3)(A)), the taxpayer only pays the tax

imposed by section 1401(b) on $89,000. The $1,000 from

the sale of the capital asset is subject to NIIT. (However, if

the sale of the capital asset was an asset used in a

non-section 1411 trade or business, the capital gain would

also be excluded from NII under section 1411(c)(1)(A)(iii).)

See Regulations section 1.1411-9(b).

Specific Instructions

Part I—Investment Income

Elections for Investment Income

If you’re making the section 6013(g) or 6013(h) election

(see Election To File Jointly With Nonresident

Spouse—Section 6013(g) or 6013(h), earlier), check the

corresponding checkbox.

If you’re making or have made a section 1.1411-10(g)

election (see Regulations Section 1.1411-10(g) Election,

earlier), check the corresponding checkbox and attach a

statement to your return, as described earlier under

Content requirements of election.

Line 1—Taxable Interest

Enter the amount of taxable interest received. Include the

following amount from your return.

• Form 1040 or 1040-SR, line 2b.

• Form 1041, line 1.

• Form 1041-QFT, line 1a.

Instructions for Form 8960 (2025)

Adjustments to interest. Interest income earned in the

ordinary course of your non-section 1411 trade or

business is excluded from NII. If this type of interest

income is included on line 1, use line 7 to adjust your NII.

If line 1 includes self-charged interest income received

from a partnership or S corporation that’s a nonpassive

activity (other than a trade or business of trading in

financial instruments or commodities), see Line 7—Other

Modifications to Investment Income, later, for a possible

adjustment to NII.

Line 2—Ordinary Dividends

Enter the amount of ordinary dividends received. Include

the following amount from your return.

• Form 1040 or 1040-SR, line 3b.

• Form 1041, line 2a.

• Form 1041-QFT, line 2a.

• Form 1040-NR, ordinary dividends received for period

of U.S. residency shown on attached statement.

See Special computational rules for qualified funeral

trusts (QFTs) and Dual-status individual, earlier.

Adjustments to dividends. If line 2 includes dividends

from employer securities held in an employee stock

ownership plan (ESOP) that are deductible under section

404(k) or Alaska Permanent Fund Dividends, include

those amounts as negative modifications on line 7. See

Line 7—Other Modifications to Investment Income, later.

Line 3—Annuities

Enter the gross income from all annuities, except annuities

paid from the following.

• Section 401—qualified pension, profit-sharing, and

stock bonus plans.

• Section 403(a)—qualified annuity plans purchased by

an employer for an employee.

• Section 403(b)—annuities purchased by public schools

or section 501(c)(3) tax-exempt organizations.

• Section 408—individual retirement accounts (IRAs) or

annuities.

• Section 408A—Roth IRAs.

• Section 457(b)—deferred compensation plans of a

state and local government and tax-exempt organization.

• Amounts paid in consideration for services (for

example, distributions from a foreign retirement plan that

are paid in the form of an annuity and include investment

income that was earned by the retirement plan).

How your annuities are reported to you. NII from

annuities is reported to a recipient on Form 1099-R,

Distributions From Pensions, Annuities, Retirement or

Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

However, the amount reported on Form 1099-R may also

include annuity payments from retirement plans that are

exempt from NIIT. Amounts subject to NIIT should be

identified with code “D” in box 7. If code “D” is shown in

7

box 7 of Form 1099-R, include on Form 8960, line 3, the

taxable amount reported in box 2a of Form 1099-R.

However, if the payor checks box 2b indicating the taxable

amount can’t be determined, you may need to calculate

the taxable portion of your distribution. See Pub. 939,

General Rule for Pensions and Annuities; and Pub. 575,

Pension and Annuity Income, for details.

Line 4a—Income From Trades/Businesses/

Farming, Rental Real Estate, Royalties,

Partnerships, S Corporations, and Trusts

Enter the following amount from your properly completed

return.

• Schedule 1 (Form 1040), line 3.

• Schedule 1 (Form 1040), line 5.

• Schedule 1 (Form 1040), line 6.

• Form 1041, line 3.

• Form 1041, line 5.

• Form 1041, line 6.

• Form 1041-QFT, the portion of line 4 that’s income and

loss that would properly be reported by a trust filing Form

1041 on Form 1041, line 5.

• Form 1040-NR, the amount properly reported on the

attachment to your Form 1040-NR representing the

amount that you would properly include on Schedule 1

(Form 1040), line 5, if you were filing Form 1040 or 1040SR and including income and loss only for your period of

U.S. residency.

See Special computational rules for qualified funeral

trusts (QFTs) and Dual-status individual, earlier.

For line 4b adjustments, enter net positive

amounts as a negative adjustment and enter net

CAUTION negative amounts as a positive adjustment.

!

In order to generally capture passive income from

TIP trades/businesses/farming that is subject to NIIT,

total income from Schedules C, E, and F (Form

1040) is entered on line 4a. Nonpassive income not

subject to NIIT is entered as a negative amount on line 4b.

Additionally, income entered on Schedules C, E, and F

(Form 1040) that is not subject to self-employment tax

under section 1401(b) is also entered as a negative on

line 4b. Note also additional adjustments to total line 4a

income that are detailed under line 4b.

Conversely, a total loss comprised of both passive and

nonpassive income is entered as a negative on line 4a.

Nonpassive losses entered on Schedules C, E, and F

(Form 1040) are added back as income on line 4b. See

Section 1411 NOL for information about figuring the

allowed loss, if any, for NII purposes.

Line 4b—Adjustment for Net Income or Loss

Derived in the Ordinary Course of a Non-Section

1411 Trade or Business or Otherwise Excepted

Use line 4b to adjust the amounts included on line 4a, for

gains and losses that are excluded from the calculation of

NII. Enter the amount of gains (as a negative number) and

losses (as a positive number). Enter the net positive or net

8

negative amount for the following items included on

line 4a that aren’t included in determining NII.

• Net income or loss from a section 162 trade or business

that’s not a passive activity and isn’t engaged in a trade or

business of trading financial instruments or commodities.

• Net income or loss from a section 1411 trade or

business that’s taken into account in determining

self-employment income. See Special Rule for

Self-employed Individuals, earlier.

• Royalties derived in the ordinary course of a section

162 trade or business that’s not a passive activity.

• Passive losses of a former passive activity that are

allowed as a deduction in the current year under section

469(f)(1)(A).

In addition, use line 4b to adjust for certain types of

nonpassive rental income or loss derived in the ordinary

course of a section 162 trade or business. For example,

line 4b includes the following items.

• Nonpassive net rental income or loss of a real estate

professional where the rental activity rises to a section 162

trade or business.

• Net rental income or loss that’s a nonpassive activity

because it was grouped with a trade or business under

Regulations section 1.469-4(d)(1). See Special Rules for

Certain Rental Income, earlier.

• Other rental income or loss from a section 162 trade or

business reported on Schedule K-1 (Form 1065),

Partner’s Share of Income, Deductions, Credits, etc.,

line 3, from a partnership, or Schedule K-1 (Form 1120-S),

Shareholder’s Share of Income, Deductions, Credits, etc.,

line 3, from an S corporation, where the activity isn’t a

passive activity.

• Net income that’s been recharacterized as not from a

passive activity under the section 469 passive loss rules

and is derived in the ordinary course of a section 162

trade or business, for example:

1. Net rental income or loss from a rental that meets

an exception under Regulations section 1.469-1T(e)(3)(ii),

the activity rises to a section 162 trade or business, and

you materially participated in the activity; or

2. Net income from property rented to a nonpassive

activity. See Special Rules for Certain Rental Income,

earlier.

Note: Any income from an estate or trust reported in Part

III of Schedule E (Form 1040) that excluded NII is taken

into account on line 7. Don’t report those adjustments on

line 4b.

Lines 5a–5d—Gains and Losses on the

Dispositions of Property

Generally, net gain from the disposition of property not

used in a trade or business and net gain or loss from the

disposition of property held in a section 1411 trade or

business are included in NII if included in taxable income.

Gains and losses that aren’t taken into account in

computing taxable income aren’t taken into account in

computing NII. For example, gain that isn’t taxable by

reason of section 121 (sale of a principal residence) or

section 1031 (like-kind exchanges) isn’t included in NII.

However, gains from the sale of investment real estate,

Instructions for Form 8960 (2025)

including a second home that is not a qualified principal

residence under section 121, is subject to NIIT.

See the Lines 5a–5d—Net Gains and Losses

Worksheet, in these instructions, for assistance in

calculating net gain or loss includible in NII.

Line 5a—Net Gain or Loss From Disposition of

Property

Calculate and enter the amount of net gain or loss from

the disposition of property by combining the following

amounts from your properly completed return.

• Form 1040 or 1040-SR, line 7a, and Schedule 1 (Form

1040), line 4.

• Form 1041, lines 4 and 7.

• Form 1041-QFT, line 3, and the portion of line 4

attributed to ordinary gain/(loss).

• Form 1040-NR, the amounts properly reported on the

attachment to your Form 1040-NR representing the

amounts that you would enter on Form 1040 or 1040-SR,

line 7a, and Schedule 1 (Form 1040), line 4, if you were

filing Form 1040 or 1040-SR and including net gain or loss

only for your period of U.S. residency.

See Special computational rules for qualified funeral

trusts (QFTs) and Dual-status individual, earlier.

Note: If you incur gain or loss from a disposition that isn’t

reported as described in the previous paragraph, report it

on line 7. See Line 7—Other Modifications to Investment

Income, later.

Line 5b—Net Gain or Loss From Disposition of

Property That Isn’t Subject to Net Investment

Income Tax

Use line 5b to adjust the amounts included on line 5a for

gains and losses that are excluded from the calculation of

NII. Enter the amount of gains (as a negative number) and

losses (as a positive number) included on line 5a that are

excluded from NII. For example, line 5b will include

amounts such as the following.

• Gain or loss from the sale of property held in a

non-section 1411 trade or business.

1. However, if the losses are attributable to formerly

suspended passive losses of the non-section 1411 trade

or business, such gains and losses are excluded from NII

to the extent the nonpassive income from the non-section

1411 trade or business is excluded from NII. See

Regulations section 1.1411-4(g)(8) for more information

and examples.

2. Gain or loss from the sale of property held in a

non-section 1411 trade or business doesn’t include

substantially appreciated property that’s recharacterized

as portfolio income. See Substantially appreciated

property, later.

• Gain attributable to net unrealized appreciation (NUA)

in employer securities held by a qualified plan. See Net

gain attributable to Net Unrealized Appreciation (NUA) in

employer securities held by a qualified plan, later.

Instructions for Form 8960 (2025)

• Adjustments to your capital loss carryforwards for items

of excluded loss. See Adjustments to your capital loss

carryforwards, later.

Substantially appreciated property. If an interest in

property is substantially appreciated at the time of

disposition (fair market value exceeds 120% of the

adjusted basis), any gain from the disposition is treated as

nonpassive, unless the interest in property was used in a

passive activity for either:

1. 20% of the total period during which you held the

interest in property, or

2. The entire 2-year period ending on the date of the

disposition.

See Regulations section 1.469-2(c)(2)(iii). The

recharacterized gain may be taken into account under

section 1411(c)(1)(A)(iii) if the gain is attributable to the

disposition of property and recharacterized as portfolio

income.

Net gain attributable to Net Unrealized Appreciation

(NUA) in employer securities held by a qualified plan.

Any gain attributable to NUA (within the meaning of

section 402(e)(4)) that you realize on a disposition of

employer securities held by a qualified plan is a

distribution within the meaning of section 1411(c)(5) and

isn’t included in NII. However, any gain realized on a

disposition of employer securities attributable to

appreciation in the value of your employer securities after

the distribution from a qualified plan isn’t a distribution

within the meaning of section 1411(c)(5) and is included in

NII.

Shareholders of CFCs and QEFs without a section

1.1411-10(g) election. In the case of a QEF (other than

a QEF held in a section 1411 trade or business) for which

a section 1.1411-10(g) election isn’t in effect, enter the

amount treated as long-term capital gain for regular

income tax purposes under section 1293(a)(1)(B).

Also, in the case of a disposition of a CFC or QEF

(other than a CFC or QEF held in a section 1411 trade or

business) for which a section 1.1411-10(g) election isn’t in

effect, enter the increase or decrease in the amount of

gain or loss for NIIT purposes over the amount of gain or

loss for regular income tax purposes. However, if the gain

is higher (or the loss larger) for NIIT purposes compared

to regular income tax purposes, in which case there’s no

impact to the adjustment for capital loss carryforwards for

NIIT purposes, enter the difference on line 6.

Adjustments to your capital loss carryforwards.

Starting in 2014, capital loss carryforwards must be

adjusted if any sum of all capital gain or loss amounts

excluded from NII on lines 5b and 5c was a net loss (the

sum of all excluded capital losses was greater than the

sum of all excluded capital gains). Generally, the annual

adjustment to your capital losses carryforward is the

lesser of:

• The amount of your capital loss carryforward from the

previous year (the sum of carryforward amounts reflected

on Schedule D (Form 1040), Capital Gains and Losses,

lines 6 and 14); or

• The amount of excluded capital losses in excess of

excluded capital gain in the previous year.

9

Lines 5a–5d—Net Gains and Losses Worksheet

(A)

Capital gains/(losses):

Form 1040 or 1040-SR,

line 7a; Form 1041,

line 4; Form 1041-QFT,

line 3; Form 1040-NR,

statement reflecting

U.S. residency portion

of Form 1040 or

1040-SR, line 7a

1.

2.

Total of columns (A)+(B)

Enter

this

amount

on line 5a

Beginning net gains and losses

Gains and losses excluded from NII. Use current-year amounts for lines 2a–2g and 2i.

(a) Enter net gains from the disposition of property used in a

non-section 1411 trade or business (enter as negative

amounts):

(

Name of trade or business

Amount

(

)

(

)

(b) Enter net losses from the disposition of property used in

a non-section 1411 trade or business (enter as positive

amounts):

Name of trade or business

Amount

(c) Enter net losses from a former passive activity allowed

by reason of section 469(f)(1)(A) . . . . . . . . . . . . . . . .

(d) Gains recognized in the current year for payments

received on an installment sale obligation or private

annuity for the disposition of property used in a

non-section 1411 trade or business . . . . . . . . . . . . . .

(e) Enter the net gain attributable to the net unrealized

appreciation (NUA) in employer securities . . . . . . . . . .

(f) In the case of a QEF (other than a QEF held in a section

1411 trade or business) for which a section 1.1411-10(g)

election isn’t in effect, enter the amount treated as

long-term capital gain for regular income tax purposes

under section 1293(a)(1)(B) . . . . . . . . . . . . . . . . . . . .

(g) Enter any other gains and losses included in NII that

aren’t otherwise reported on Form 8960 and any other

gains and losses excluded from NII reported on line 5a.

(Enter excluded gains as a negative number and

excluded losses as a positive number.) . . . . . . . . . . . .

(h) Enter the amount reported on line 2(i) of this worksheet

from your prior tax year return calculations. Enter as a

positive number . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i) If you don’t have a capital loss carryover to next year,

then skip this line and go to line 2(j). Otherwise, enter the

lesser of (i)(1) or (i)(2) as a negative amount . . . . . . . .

(i)(1) If the sum of the amounts

entered on lines 2(a)–2(h) and

line 3(d), column (A), is greater than

zero, enter that amount here.

Otherwise, enter -0- on line 2(i) and

go to line 2(j) . . . . . . . . . . . . . . . . .

OR

(i)(2) The amount of capital loss

carried over to next year (Schedule D

(Form 1040), line 16, less the amount

allowed as a current deduction on

Schedule D (Form 1040), line 21)

entered as a positive

number . . . . . . . . . . . . . . . . . . . .

(j) Sum of lines 2(a) through 2(i)

10

(B)

Ordinary gains/

(losses): Schedule 1

(Form 1040), line 4;

Form 1041, line 7;

Form 1041-QFT,

portion of line 4

attributed to ordinary

gain/(loss); Form

1040-NR, statement

reflecting U.S.

residency portion of

Schedule 1 (Form

1040), line 4

)(

(

)

(

)

(

)

(

)

)

Enter

this

amount

on line 5b

Instructions for Form 8960 (2025)

Lines 5a–5d—Net Gains and Losses Worksheet—(continued)

(A)

Capital gains/(losses):

Form 1040 or 1040-SR,

line 7a; Form 1041,

line 4; Form 1041-QFT,

line 3; Form 1040-NR,

statement reflecting

U.S. residency portion

of Form 1040 or

1040-SR, line 7a

3.

(B)

Ordinary gains/

(losses): Schedule 1

(Form 1040), line 4;

Form 1041, line 7;

Form 1041-QFT,

portion of line 4

attributed to ordinary

gain/(loss); Form

1040-NR, statement

reflecting U.S.

residency portion of

Schedule 1 (Form

1040), line 4

Total of columns (A)+(B)

Adjustment for gains and losses attributable to the disposition of interests in partnerships and S corporations

(a)

Net

gains

(i) Enter the amount of net gain from the disposition of

a partnership or S corporation included on line 5a

to which section 1411(c)(4)(A) applies . . . . . . . .

(ii) Enter the amount of net gain included in NII after

the application of Regulations section 1.1411-7.

(The sum of columns A and B of line 3(a)(ii) must

be less than, or equal to, the sum of columns A and

B of line 3(a)(i).) . . . . . . . . . . . . . . . . . . . . . . . . .

(iii Enter the difference between line 3(a)(i) and

) line 3(a)(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

(i) Enter the amount of net loss from the disposition of

Net

an interest in a partnership or S corporation

losses

included on line 5a to which section 1411(c)(4)(B)

applies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ii) Enter the amount of net loss included in NII after

the application of Regulations section 1.1411-7.

(The sum of columns A and B of line 3(b)(ii) must

be less than, or equal to, the sum of columns A and

B of line 3(b)(i).) . . . . . . . . . . . . . . . . . . . . . . . . .

(iii Enter the difference between line 3(b)(i) and

) line 3(b)(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)

(i) Enter the amount of gain recognized in the current

Deferred

year attributable to payments received on an

sales

installment sale obligation or private annuity that

was attributable to the disposition of an interest in a

partnership or S corporation in a year preceding the

current year. Also report any gain or loss

associated with section 736(b) payments on this

line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ii) Enter the amount of adjustment attributable to such

gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iii Subtract line 3(c)(ii) from line 3(c)(i) . . . . . . . . . .

)

(d)

Combine the amounts on lines 3(a)(iii), 3(b)(iii),

and 3(c)(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

Sum of items reported on lines 5a–5c

Add lines 1, 2(j), and 3(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TIP

Enter

this

amount

on line 5c

Enter

this

amount

on line 5d

If the amount of gain for NIIT purposes is less than the amount of gain for regular income tax purposes, the entry on line 3(a)

(iii), 3(b)(iii), or 3(c)(iii) should be a negative number.

If the amount of loss for NIIT purposes is less than the amount of loss for regular income tax purposes, the entry on line 3(a)

(iii), 3(b)(iii), or 3(c)(iii) should be a positive number.

Instructions for Form 8960 (2025)

11

See the Lines 5a–5d—Net Gains and Losses

Worksheet, in these instructions, for assistance with the

calculation of capital loss carryforwards. In addition, see

Proposed Regulations section 1.1411-4(d)(4)(iii) for more

information and a comprehensive example of the

application of this rule.

Pass-through entities. If you hold an interest in a

pass-through entity, the determination of whether a trade

or business exists is made at that entity’s level.

Line 5c—Adjustment From Disposition of

Partnership Interest or S Corporation Stock

Enter the amount from the worksheet for lines 5a–5d,

line 3d. Attach a statement as described under Required

statements, earlier, to your return for the year of the

disposition.

Line 6—Adjustments to Investment Income for

Certain CFCs and PFICs

If you own stock, directly or indirectly, in a CFC or PFIC

(other than certain CFCs and PFICs held in a section

1411 trade or business or PFICs marked to market under

a provision of Code chapter 1 other than section 1296),

use line 6 for adjustments necessary to calculate your NII.

Income from investments in CFCs and PFICs is

generally included in the calculation of NII and, in many

cases, will be included (in whole or in part) on other lines

of Form 8960. Generally, dividends from a CFC or PFIC

that are included in your regular income tax base are

included on Form 8960, line 2, and gains and losses

derived from the stock of a CFC or PFIC that are included

in your regular income tax base are generally included on

Form 8960, line 5. Also, income derived from CFCs and

certain PFICs you hold in a section 1411 trade or business

is generally reported on Form 8960, line 4a.

Line 6 is used for adjustments that are the result of

additional rules. These additional rules may apply when

you own an interest in a CFC or PFIC and may require you

to subtract or add amounts not otherwise included on

Form 8960. These additional rules vary depending on the

set of anti-deferral rules that apply to you for regular

income tax purposes, and for CFCs and QEFs, and

depending on whether you have a section 1.1411-10(g)

election in effect for the CFC or QEF. For more information

about determining the amount to report on line 6, see

Regulations section 1.1411-10.

Section 1296 mark-to-market PFICs. Generally, if

you’re subject to the section 1296 mark-to-market rules for

a PFIC, you’ll include in NII any amounts included in

income for regular income tax purposes under section

1296(a)(1) and deduct from NII any amounts deducted

from income for regular income tax purposes under

section 1296(a)(2). Use line 6 to make increases or

decreases to NII as a result of this rule (for items that

aren’t otherwise reflected on Form 8960).

Section 1291 funds. If you’re subject to the section 1291

rules for a PFIC, you’ll include in NII any “excess

distributions that are dividends for NIIT purposes as well

12

as any gains that are treated as excess distributions for

regular income tax purposes.” Use line 6 to make the

increases to NII as a result of the application of this rule

(for items that aren’t otherwise reflected on Form 8960).

CFCs and QEFs with a section 1.1411-10(g) election

in effect. If you have a section 1.1411-10(g) election in

effect for a CFC or QEF, you’ll include in NII any inclusions

under section 951(a), 951A, or 1293(a) derived from the

CFC or QEF. Inclusions under section 1293(a)(1)(B) may

be reported elsewhere on Form 8960, such as on line 5a.

Use line 6 to make the increases to NII as a result of the

application of this rule (for items that aren’t otherwise

reflected on Form 8960).

Note: If you included in income an amount under section

951(a) or section 1293(a) for a CFC or QEF in 2013 and

made an election under section 1.1411-10(g) after 2013

for that CFC or QEF, special rules may apply to certain

distributions of previously taxed income from the CFC or

QEF that aren’t subject to regular income tax. For more

information, see Regulations section 1.1411-10.

CFCs and QEFs without a section 1.1411-10(g) election in effect. If you don’t have a section 1.1411-10(g)

election in effect for a CFC or QEF, you’ll generally include

in NII certain distributions of previously taxed income from

the CFC or QEF that aren’t subject to regular income tax.

In addition, other special rules may apply, including rules

that provide, as applicable, alternative basis calculations

for your basis in the CFC or QEF, or your basis in a

domestic partnership or S corporation that owns the

interest in the CFC or QEF. Also, the amount of investment

interest expense you take into account for NIIT purposes

may be increased or decreased from the amount taken

into account for regular income tax purposes. (For

additional information on all of these rules, see

Regulations section 1.1411-10.) As a result of these rules,

you may need to include amounts in NII that aren’t

otherwise reported on Form 8960 or make adjustments to

amounts reported elsewhere on Form 8960. For example,

you may need to include distributions from a CFC or QEF

in NII. Use line 6 to make increases or decreases to NII as

a result of the application of this rule (for items that aren’t

otherwise reflected on Form 8960).

Note: Use line 5b to deduct inclusions under section

1293(a)(1)(B) that are allowed on line 5a, or to adjust the

amount of gain or loss derived from the disposition of

shares of a CFC or QEF. However, if the gain included in

NII is higher than the amount reported for regular income

tax (or the loss is greater), report the adjustment on line 6.

Note: Even if you don’t have a section 1.1411-10(g)

election in place for a CFC or QEF, there are certain

instances in which distributions to you from the CFC or

QEF may not be subject to NIIT. For example, if a prior

holder of the CFC or QEF had made a section

1.1411-10(g) election for that CFC or QEF and you

receive a distribution of earnings and profits that were

previously included in the NII of the prior holder, you may

not be subject to NIIT on that distribution. For more

information, see Regulations section 1.1411-10.

Instructions for Form 8960 (2025)

Line 7—Other Modifications to Investment Income

Use line 7 to report additional NII modifications to NII that

aren’t otherwise specified on lines 1–6. For example, use

line 7 to report additions and modifications to NII, such as

the following.

• Section 1411 net operating loss (NOL) (enter as a

negative amount). See Section 1411 NOL, later.

• Any deductions described in section 62(a)(1) that are

properly allocable to a passive activity or trading business,

but aren’t taken into account on line 4a or 5a (enter as a

negative amount). See Other section 62(a)(1) deductions,

later.

• Adjustments for distributions from estates and trusts.

See Distributions from estates and trusts, later.

• Section 404(k) dividends reported on line 2 (enter as a

negative amount). See Line 2—Ordinary Dividends,

earlier.

• Interest income reported on line 1 received from certain

nonpassive activities (entered as a negative amount). See

Self-charged interest, later.

• Recoveries of deductions taken on a prior year’s Form

8960. See Deduction recoveries, later.

• Other items of NII (or properly allocable deductions) not

otherwise included on Form 8960 reported on Schedule 1

(Form 1040), line 8z; Form 1041, line 8; Form 1041-QFT,

lines 4 and 9; and Form 1040-NR, amount on statement

reporting tax items for your period of U.S. residency

corresponding to Schedule 1 (Form 1040), line 8z. For

example, these items could include the following.

1. Amounts reported on Form 8814, Parents’ Election

To Report Child’s Interest and Dividends, line 12. See

Form 8814 election, later.

2. Substitute interest and dividend payments

(generally reported on Form 1099-MISC, Miscellaneous

Information).

3. Net positive periodic payments received from a

notional principal contract (NPC) that’s referenced to

property (including an index) that produces (or would

produce, if the property were to produce income) interest,

dividends, royalties, or rents. For example, an interest rate

swap, cap, or floor and an equity swap would be treated

as an NPC that produces NII.

• Gains and losses from the disposition of property not

included on line 5a that are taken into account in

computing taxable income, for example:

1. Gain or loss from the disposition of an annuity or life

insurance contract (see Line 3—Annuities, earlier); and

2. Casualty and theft losses reported on Schedule A

(Form 1040), Itemized Deductions, line 15 (enter as a

negative amount).

However, gains and losses attributable to assets held in a

non-section 1411 trade or business aren’t included in NII.

For more information, see Line 5b—Net Gain or Loss

From Disposition of Property That Isn’t Subject to Net

Investment Income Tax, earlier.

Other section 62(a)(1) deductions. Use line 7 to report

additional deductions attributable to a section 1411 trade

or business that aren’t included on lines 4–6. Generally,

these deductions are above-the-line deductions reported

on Schedule 1 (Form 1040), lines 11–25. Similar section

62(a) deductions more directly related to investment

Instructions for Form 8960 (2025)

income are addressed in Part II, and Line 9c

Miscellaneous Investment Expenses, later.

Note: Expenses associated with the trade or business of

trading in financial instruments or commodities that are

not reflected on line 4a, from your Schedule C (Form

1040), are reported on Form 8960, line 10, as an

adjustment or modification. See Special rule for traders in

financial instruments or commodities, later.

Note: Early withdrawal penalty (Schedule 1 (Form 1040),

line 18) is reported on Form 8960, line 10.

Form 8814 election. Parents electing to include their

child’s dividends and capital gain distributions in their

income by filing Form 8814 must include on Form 8960,

line 7, the amount on Form 8814, line 12, excluding

Alaska Permanent Fund Dividends.

Distributions from estates and trusts. Enter the

amount from box 14, code H, of Schedule K-1 (Form

1041), Beneficiary’s Share of Income, Deductions,

Credits, etc.

Note: If the amount reported in box 14, code H, of

Schedule K-1 (Form 1041) is a positive number, enter it on

Form 8960, line 7, and increase your MAGI on Form 8960,

line 13 (or Form 8960, line 19a), by the same amount.

If the amount reported in box 14, code H, of

Schedule K-1 (Form 1041) is a negative number, and the

trust has indicated some (or all) of the adjustment also

requires a MAGI adjustment, enter it on Form 8960, line 7,

and make the applicable increase or decrease to your

MAGI on Form 8960, line 13 (or Form 8960, line 19a), as

necessary.

Section 1411 NOL. If you are allowed an NOL deduction

under section 172 for purposes of determining your

regular income tax, you may also be allowed some, or all,

of the NOL deduction in computing NII. Because NOLs

are computed and carried over year by year, you must

determine for each NOL year what portion of the NOL is

attributable to NII. To determine how much of the

accumulated NOL you can use in the current tax year as a

deduction against your NII, you must first calculate your

applicable portion of the NOL for each loss year. For more

information and examples on the calculation of a section

1411 NOL and its use, see Regulations section

1.1411-4(h).

Note: No portion of an NOL incurred in a tax year

beginning before 2013 is permitted to reduce NII.

Calculating your section 1411 NOL. In any tax year

in which a taxpayer incurs an NOL, the section 1411 NOL

is the lesser of:

• The amount of the NOL for the loss year the taxpayer

would incur if only items of gross income that are used to

determine NII and only properly allocable deductions

(other than a section 1411 NOL) are taken into account in

determining the NOL under section 172, or

• The amount of the taxpayer’s NOL for the loss year.

For purposes of calculating the section 1411 NOL,

TIP compute your NOL using Form 172, Net

Operating Losses (NOLs), with only items of

income, gain, loss, and deduction on Form 8960 for that

13

Example: Calculation of Section 1411 NOL for NIIT

Assume an unmarried individual incurs the following NOLs and has waived any potential carryback for each passing year

under section 172(b)(3), and assume that carryforwards are not limited:

NOL origination year

(A) Regular income tax NOL

(B) Section 1411 NOL

(C) Applicable portion of NOL

[column B divided by column A]

2020 Calendar year

$150,000

None

0.00%

2021 Calendar year

$100,000

$30,000

30.0%

2022 Calendar year

$40,000

$40,000

100%

2023 Calendar year

$120,000

$60,000

50.0%

Beginning in 2024, the unmarried individual begins to use the NOLs to offset income.

Tax year

NOL origination year

Regular income

Applicable portion

Section 1411 NOL

2020 NOL

($150,000)

0.00%

None

2021 NOL

($100,000)

30.0%

($30,000)

2022 NOL

($40,000)

100.0%

($40,000)

2023 NOL

($10,000)

50.0%

2024 Tax Year

$300,000

Total section 1411 NOL allowed as deduction against 2024 net investment income . . . . . . . . . . . . . .

($5,000)

($75,000)

In 2024, the regular income tax NOLs from 2020–2023 have caused the taxpayer’s AGI ($0) to fall below the statutory threshold; therefore,

the individual isn’t subject to the NIIT.

Tax year

NOL origination year

Regular income

2025 Tax Year

Applicable portion

Section 1411 NOL

$600,000

2023 NOL

($110,000)

50.0%

Total section 1411 NOL allowed as deduction against 2025 net investment income . . . . . . . . . . . . . .

($55,000)

($55,000)

In 2025, the regular income tax NOL remaining from 2023 has reduced the taxpayer’s income for regular income tax to $490,000. The

individual is entitled to reduce NII by $55,000 (entered as a negative amount on Form 8960, line 7).

year. If this amount is less than your NOL computed for

regular income tax purposes, then this amount is the

applicable portion of your NOL. If this amount is equal to,

or greater than, your NOL computed for regular income

tax purposes, then your applicable portion is 100% of the

regular income tax NOL (which means the entire NOL will

be deductible in computing NII when the NOL is used for

regular income tax purposes).

Using your section 1411 NOL. When you deduct an

NOL that originated in a previous year against the

current-year income, a portion of the NOL may be

deductible in computing NII for the current year,

regardless of whether you’re subject to the NIIT in the

current year without the NOL deduction. The amount of

the regular income tax NOL used in calculating NII is

called the applicable portion. The applicable portion is the

percentage of the regular income tax NOL that’s a section

1411 NOL. Because NOLs are calculated on a

year-by-year basis, the applicable portion of each NOL

that’s used in the current year may be different.

Note: If you incurred an NOL after 2012 and carried back

that NOL to offset income in years preceding the

14

imposition of the NIIT (for example, a carryback to

calendar year 2011 and/or 2012), the amount of section

1411 NOL that was included in the NOL carryback

would’ve been used (as an applicable portion) even

though the NIIT wasn’t in effect.

See Example: Calculation of Section 1411 NOL for

NIIT, in these instructions, for an illustration of the

calculation and use of a section 1411 NOL for NIIT

purposes.

Deduction recoveries. A recovery or refund of a

previously deducted item increases NII in the year of the

recovery. There are two exceptions to this general rule.

Generally, for purposes of determining the gross

amount of the recovery, include the recovery of any

amount that was deducted in a prior year, regardless of

the application of the tax benefit rule (see section 111).

For example, if a taxpayer receives a refund of state

income taxes from a prior year, such a refund would be

included in the taxpayer’s gross income. However, if the

taxpayer was subject to the alternative minimum tax in the

year of the payment, the taxpayer may not have received

any tax benefit under chapter 1 of the Code, and therefore

section 111 may exclude some or all of the refund from

Instructions for Form 8960 (2025)

gross income. However, the deductibility of state income

taxes for NIIT is independent of the taxes for alternative

minimum tax purposes. Therefore, the applicability of the

recovery rule is determined without regard to whether the

recovered amount was excluded from gross income by

reason of section 111.

There are two exceptions to including recovered

amounts in NII. The two exceptions apply the tax benefit

rule of section 111 within the NIIT system, and therefore

operate independently of the application of section 111 for

Code chapter 1 purposes. First, properly allocable

deductions aren’t reduced in the year of the recovery if the

amount deducted in the prior year didn’t reduce the

amount of section 1411 liability. Second, properly

allocable deductions aren’t reduced in the year of the

recovery if the amount deducted in the prior year is

included in NII.

Note: The total amount of recovery reported on Form

8960, line 7, can’t exceed the total amount of properly

allocable deductions for the year.

If the recovered amount relates to a deduction

TIP taken in a tax year beginning before 2013, none of

the recovery is included in NII in the year of

recovery.

If the recovered amount relates to a deduction

TIP taken in a tax year beginning after 2012 and you

weren’t subject to the NIIT because your MAGI

(see Line 13—Modified Adjusted Gross Income (MAGI),

later, was below the applicable threshold on line 14, then

Line 7—Deduction Recoveries Worksheet

1. Enter total amount of recovery included in gross income . . . . . . . . . . . . . . .

• Don’t include recoveries of items that are included in NII in the year of

recovery (included on lines 1–6).

• Don’t include recoveries of items if the amount relates to a deduction

taken in a tax year beginning before 2013.

• Don’t include recoveries of items if the amount relates to a deduction

taken in a tax year beginning after 2012, and you weren’t subject to the

NIIT solely because your MAGI was below the applicable threshold.

!

1.

This rule doesn’t apply if you incurred an NOL in such year, and a

portion of such NOL constitutes a section 1411 NOL.

CAUTION

2. Amount of the recovery that would’ve been included in gross income,

except for the application of the tax benefit rule under section 111 . . . . . . 2.

3. Total amount of recovery (add lines 1 and 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Enter the percentage of the deduction allocated to NII in the prior year. (If

the deduction wasn’t allocated between investment income and

noninvestment income, enter 100%.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.

5. Enter the lesser of (a) line 3 multiplied by line 4, or (b) the total amount deducted

on the prior-year Form 8960 attributable to items recovered (after any deduction

limitations imposed by section 67 or section 68 in a tax year prior to 2018) . . . . . . . . . . . . . . . .

3.

5.

Calculation of recoveries when the deduction isn’t taken into account in computing your section 1411 NOL

6. Multiply line 5 by 3.8% (0.038) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. Enter the amount of NII in the year of the deduction (previous year’s Form

8960, line 12, unless line 12 is zero, then previous year’s Form 8960,

line 8 minus line 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Add the amount on line 5 to line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.

9. Using the previous year’s Form 8960, recalculate the NIIT for the year of

the deduction by replacing the amount reported on line 12 with the

amount reported on line 8 of this worksheet (don’t use the NII reported on

that year’s Form 8960, line 12). Enter your recalculated NIIT here . . . . . . . 9.

10. Enter the NIIT reported for the year of the deduction . . . . . . . . . . . . . . . . . . . 10.

11. Subtract line 10 from line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.

12. Enter the smaller of line 6 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.

13. Divide line 12 by 3.8% (0.038). Enter the result here and include on

Form 8960, line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.

Calculation of recoveries when the deduction is taken into account in computing your section 1411 NOL

14. Enter the amount of the section 1411 NOL in the year of the deduction

(entered as a positive number) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.

15. Enter the amount of the section 1411 NOL in the year of the deduction

recomputed without the amount on line 5 (entered as a positive number,

but not less than zero) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.

16. Subtract line 15 from line 14. Enter the result here and include on

Form 8960, line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.

Instructions for Form 8960 (2025)

15

none of the recovery is included in NII in the year of

recovery. However, this rule doesn’t apply if you incurred

an NOL in the year of the deduction, and a portion of your

NOL is a section 1411 NOL.

If the recovered amount is included in NII on lines

TIP 1–6, none of the recovery is included in NII on

line 7.

See Regulations section 1.1411-4(g)(2) for more

information and examples. See the Line 7—Deduction

Recoveries Worksheet, in these instructions, to determine

the amount of any recovery to include on line 7.

In the case of multiple recoveries in a single year,

TIP complete this worksheet for each recovery. If

multiple recoveries relate to a single deduction

year, the amount reported on lines 8 and 9 of the first

recovery worksheet will become lines 7 and 10,

respectively, on the second recovery worksheet.

Self-charged interest. The self-charged interest rules

under section 469 (passive activity loss limitation) apply to

lending transactions between a taxpayer and a

pass-through entity in which the taxpayer owns a direct or

indirect interest, or between certain pass-through entities.

The section 469 self-charged interest rules apply only to

items of interest income and interest expense that are

recognized in the same tax year. The self-charged interest

rules:

• Treat certain interest income resulting from these

lending transactions as passive activity income,

• Treat certain deductions for interest expense that are

properly allocable to the interest income as passive

activity deductions, and

• Allocate the passive activity gross income and passive

activity deductions resulting from this treatment among

the taxpayer’s activities.

The rules for computing NII adopt a similar rule for

self-charged interest. See Regulations section

1.1411-4(g)(5). Include on line 7 (as a negative amount)

the amount of interest income you received that’s equal to

the amount of interest income that would’ve been

considered passive income under the self-charged

interest rules (Regulations section 1.469-7) had the

nonpassive activity been considered a passive activity.

Note: This rule doesn’t apply to interest received on loans

made to a trade or business engaged in the trading of

financial instruments or commodities.

Note: Don’t include any adjustment for interest income on

line 7 (as a negative amount) if the corresponding interest

deduction is also taken into account in determining your

self-employment income that’s subject to tax under

section 1401(b).

Part II—Investment Expenses

Allocable to Investment Income and

Modifications

Investment Expenses

Part II of Form 8960 includes deductions and

modifications to NII that aren’t otherwise included in Part I.

16

Generally, expenses associated with a passive activity

trade or business, or the trade or business of trading in

financial instruments or commodities conducted through a

pass-through entity, are already included on line 4a or on

line 5a. Part II is used to report deductions that are,

predominately, itemized deductions.

Itemized deductions are calculated separately for

purposes of figuring NII under section 1411 by identifying

which deductions are properly allocable to items of gross

investment income.

Investment expenses are described under section

163(d)(4)(C) as the deductions allowed for regular income

tax purposes (other than for interest) which are directly

connected with the production of investment income. If

allowed for regular income tax purposes, these specific

deductions are subtracted from total investment income to

arrive at NII.

For more information on properly allocable deductions,

see Regulations sections 1.1411-4(f)–(g).

If you operate a trade or business, don’t include

TIP expenses that have been deducted on other lines

of the Form 8960, such as depletion or

depreciation reported on Schedules C, E, and F (Form

1040) and included on Form 8960, line 4a.

Reasonable method allocations. To the extent that you

have a properly allocable deduction that’s allocable to

both NII and excluded income, you may use any

reasonable method to determine that portion of the

deduction that’s properly allocable to NII. The items that

may be allocated between NII and excluded income are

the following.

• Certain taxes under section 164(a) reported as itemized

deductions, if properly deducted on your return when

calculating your U.S. regular income tax. Allowed

deductions can include state, local, and foreign income

taxes; state, local, and foreign real property taxes; and

state and local personal property taxes. Total tax

deductions may be limited under section 164(b)(6) if the

expense is not associated with a trade or business or with

a section 212 activity for the production of income. These

deductions under section 164 for state, local, and foreign

taxes are excepted from miscellaneous itemized

deductions per section 67(b)(2).

• Certain ordinary and necessary expenses paid or

incurred during the tax year if properly deducted on your

return when calculating your U.S. regular income tax. For

individuals, expenses related to the production of income

from section 212 activities, if attributable to property held

for the production of rents or royalties, are allowable

adjustments to AGI. Allowable deductions include

expenses associated with the production or collection of

income; the management, conservation, or maintenance

of property held for the production of income; and

expenses to determine, collect, or obtain a refund of any

tax owed. See generally section 62(a)(4). Section 611

expenses for depletion that are attributable to property

held for the production of rents or royalties are also

allowable adjustments to AGI. See Section 212 expenses

deductible in computing adjusted gross income, below.

• Amounts paid or incurred by the fiduciary of an estate

or trust on account of administration expenses, including

Instructions for Form 8960 (2025)

fiduciaries’ fees and expenses of litigation, which are

ordinary and necessary in connection with the

performance of the duties of administration if properly

deducted on your return when calculating your U.S.

regular income tax under section 67(e).

Section 212 expenses deductible in computing

adjusted gross income. For individuals, the deductions

under section 212 for ordinary and necessary expenses

would typically be classified as miscellaneous itemized

deductions; however, section 62(a)(4) defines AGI as

gross income less allowable (above-the-line) deductions

under section 212, relating to expenses for the production

of income attributable to property held for the production

of rents or royalties. Regulations section 1.1411-4(f)(2)

allows section 62(a)(4) deductions for individuals with an

activity related to property held for the production of rents

or royalties. Individuals are allowed an above-the-line

deduction for expenses related to that activity (even if the

activity related to property held for the production of rents

or royalties doesn't rise to the level of a trade or business).

Allowable deductions attributable to property held for

the production of rents or royalties also includes depletion

under section 611.

A section 62(a)(4) above-the-line deduction includes

section 212 amounts paid for tax advice related to

property held for the production of rents or royalties, for

example, preparation of Schedule E, and amounts paid for

resolving an asserted tax deficiency related to property

held for the production of rents or royalties, and are

allowed in figuring adjusted gross income. Note, however,

that expenses to perfect or defend Title are not allowed

under Regulations section 1.263(a)-2(e).

If you have more than one of the deductions described

above, you may use a different method of allocation for

each one. The reasonable method of allocation may differ

from year to year.

Examples of reasonable methods of allocation include,

but aren’t limited to, an allocation of the deduction based

on the ratio of the amount of a taxpayer’s gross investment

income (Form 8960, line 8) to the amount of the taxpayer’s

AGI. In the case of an estate or trust, an allocation of a

deduction under Regulations section 1.652(b)-3(b), and in

the case of an ESBT, Regulations section 1.641(c)-1(h), is

also a reasonable method.

Example. An example will illustrate a reasonable

method of allocation.

Deductions taken into account in figuring net

investment income (NII) can include adjustments to

income and itemized deductions. The itemized deduction

for state and local income taxes under section 164(a)(3) is

an allowable deduction listed in Regulations section

1.1411-4(f)(3)(iii) that specifically requires application of

the Regulations section 1.1411-4(g)(1) allocation rules.

Deductions that are allocable to both NII and excluded

income may be determined by using any reasonable

method, per Regulations section 1.1411-4(g)(1). For

illustrative purposes, one reasonable method may be an

allocation of a deduction based on an NII-to-gross income

ratio.

Assume a taxpayer, who is an unmarried individual and

a U.S. citizen, earns $100,000 in wages and $60,000 of

Instructions for Form 8960 (2025)

Schedule E (Form 1040) net rental income. Total income

is $160,000 ($60,000 + $100,000). Wages are not subject

to the net investment income tax (NIIT) under Regulations

section 1.1411-1(d)(4)(ii), but the Schedule E income is

subject to NIIT under section 1411(c)(1)(A) and (B). The

Schedule E income makes up 38% of gross income

($60,000/$160,000).

Taxpayer reports $10,000 on Schedule A (Form 1040)

for section 164(a)(3) state and local income taxes,

allowable under Regulations section 1.1411-4(f)(3)(iii).

Under the NII-to-gross income ratio, the taxpayer allocates

38% of the $10,000 deduction ($3,800) to NII and 62% of

the $10,000 deduction ($6,200) to excluded income

(wages). Taxpayer has no other allowable deductions.

The taxpayer’s NII is $56,200 ($60,000 - $3,800).

Note: If an estate or trust allocates expenses for regular

income tax purposes under Regulations section

1.652(b)-3(b) or 1.641(c)-1(h), any deviation from that

allocation may not be a reasonable allocation method for

NIIT purposes.

Items not deductible in calculating net investment income. Unless a deduction is specifically identified as

properly allocable to NII in the section 1411 regulations, or

in supplemental guidance issued by the IRS in the Internal

Revenue Bulletin, the deduction isn’t permitted.

Line 9a—Investment Interest Expense

Investment interest expense is excepted from

miscellaneous itemized deductions under section 67(b)(1)

and is a properly allocable expense for purposes of

figuring NII.

Enter on Form 8960, line 9a, interest expense you paid

or accrued during the tax year deducted on Schedule A

(Form 1040), line 9. Estates and trusts enter the amount

from Form 4952, line 8 (if not required to file Form 4952,

use the form as a worksheet). For individuals filing a Form

1040-NR, include only the amount of investment interest

expense deduction for your U.S. residency period.

Note: If Form 4952 includes investment interest expense

that’s deducted on Schedule E (Form 1040) and already

taken into account on line 4a, don’t include the same

amount on line 9a.

Note: If you own a CFC or QEF for which a section

1.1411-10(g) election isn’t in effect, you may calculate

your section 163(d) investment expense deduction for

NIIT purposes differently than for regular income tax

purposes. See Regulations section 1.1411-10(c)(5) for

additional guidance. Any modification to your section

163(d) investment expense deduction for NIIT purposes is

taken into account on line 6.

Line 9b—State, Local, and Foreign Income Tax

Include state, local, and foreign income taxes you paid for

the tax year that are attributable to NII. Include also state,

local, and foreign real property taxes paid for the tax year,

as well as state and local personal property taxes paid

that are attributable to NII. See the Instructions for

17

Schedule A (Form 1040) for information and potential

limits to state and local income taxes. (Total taxes may be

limited under section 164(b)(6) if the expense is not

associated with a trade or business or with a section 212

activity for the production of income.)

Section 212 expenses deductible in computing adjusted

gross income, earlier, for details.

Form 1040-NR filers include only taxes paid for the U.S.

residency period of the tax year. Sales taxes aren’t

deductible in computing NII. You may not take a deduction

for any foreign income taxes paid for the tax year if you

took a credit for any portion of them. See section 275(a)

(4).

Dual-status individuals include only tax items related to

their period of U.S. residency. See Dual-status individual,

earlier.

You can determine the portion of your state, local, and

foreign income taxes; state, local, and foreign real

property taxes; as well as state and local personal

property taxes allocable to NII using any reasonable

method. See Reasonable method allocations, earlier.

Enter the amount of state, local, or foreign income

taxes; state, local, and foreign real property taxes; as well

as state and local personal property taxes on Form 8960,

line 9b.

Miscellaneous itemized deductions have been

terminated for tax years beginning after 2017. See

CAUTION section 67(h).

!

The overall limitation on itemized deductions is

suspended for tax year 2025 under section 68.

While we continue to discuss miscellaneous itemized

deductions under section 67 (and the 2%-of-AGI

limitation) and the overall limitation on itemized deductions

under section 68, they are suspended for tax year 2025.

Line 9c—Miscellaneous Investment Expenses

Miscellaneous investment expenses are generally no

longer deductible. Changes made by P.L. 119-21,

commonly known as the One Big Beautiful Bill Act, section

70110, make permanent the disallowance of

miscellaneous itemized deductions for tax years

beginning after 2017. Because miscellaneous itemized

deductions are not allowed in calculating taxable income,

they can’t be deductible in calculating NII because section

1411(c)(1)(B) requires an NII deduction to be allowable in

computing taxable income.

Most, but not all, investment expenses are

miscellaneous itemized deductions. Section 67(b) outlines

the types of non-miscellaneous itemized deductions, like

investment interest, that still qualify as itemized

deductions. Examples of disallowed miscellaneous

investment expenses include, but aren’t limited to,

investment fees, custodial fees, and other expenses paid

for managing investments that produce taxable income.

Under section 163(d)(4)(C), investment expenses are

described as the deductions allowed for regular income

tax purposes (other than for interest) which are directly

connected with the production of investment income. For

property held for rents or royalties, this includes

deductions under Regulations section 1.1411-4(f)(2)

which generally allow section 62 deductions to figure NII

related to activity for the production of income. See

18

Enter the amount of allowed miscellaneous investment

expenses on Form 8960, line 9c.

If you operate a trade or business, don’t include

TIP expenses that have been deducted on other lines

of the Form 8960, such as depletion or

depreciation reported on Schedules C, E, and F (Form

1040) and included on Form 8960, line 4a.

DO NOT use the Lines 9 and 10—Itemized

Deduction Limitations on Deductions Properly

CAUTION Allocable to Investment Income Worksheet to

calculate limitations for tax year 2025. Limitations under

sections 67 and 68 are suspended in tax year 2025.

!

Line 10—Additional Modifications

On line 10, report additional deductions or modifications

to NII that aren’t otherwise reflected on lines 1–9.

You may use line 10 to report properly allocable

deductions that aren’t otherwise reflected on lines 1–9.

See Regulations sections 1.1411-4(f) and 1.1411-4(g) for

details.

If you operate a trade or business, don’t include

TIP expenses that have been deducted on other lines

of the Form 8960, such as depletion or

depreciation reported on Schedules C, E, and F (Form

1040) and included on Form 8960, line 4a.

Special rule for traders in financial instruments or

commodities. If your only business is trading in financial

instruments or commodities, you may use any net loss

amount on your Schedule C (Form 1040) as a deduction

on line 10, and you don’t need to complete Schedule SE

(Form 1040), Self-Employment Tax.

If you have more than one trade or business, you must

complete Schedule SE (Form 1040) to determine whether

you can include some or all of the trading business

Schedule C (Form 1040) expenses as a deduction on

line 10. Complete the Line 10 Worksheet for Traders in

Financial Instruments That Maintain More Than One

Trade or Business.

Note: See the Instructions for Schedule SE (Form 1040)

for who must file a Schedule SE (Form 1040). Retain a

copy of the Schedule SE (Form 1040) and the worksheet

used to determine the expenses included as a

modification on line 10 with your records. Don’t file the

worksheet with Form 1040 or 1040-SR.

Instructions for Form 8960 (2025)

Lines 9 and 10—Application of Itemized Deduction Limitations on Deductions Properly Allocable to

Investment Income Worksheet

Not for use in 2025.

Part I—Application of Section 67 to Deductions Properly Allocable to Investment Income

1. Enter the amount of miscellaneous itemized deductions properly allocable to

investment income before any itemized deduction limitations (description and

Form 8960 line number where they’ll be reported).

Description

Line

Amount

(a)

(b)

2. Enter the total of all items listed on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3. Enter the amount of miscellaneous itemized deductions shown on your current

return after the application of the section 67 2%-of-AGI limitation . . . . . . . . . . . .

4. Enter the lesser of the total reported on line 2 or line 3 . . . . . . . . . . . . . . . . . . . .

3.

4.

Part II—Application of Section 67 Limitation to Specific Deductions

(B)

IF line 3 is less than

line 2, THEN divide

line 3 by line 2 AND

enter the amount in

column (B).

IF amounts reported

on Part I, lines 2 and

4, are equal, THEN

enter 1.00 in column

(B).

(A)

Re-enter the amounts and descriptions from Part I, line 1.

Description

(a)

(b)

TIP

Line

(C)

Multiply the

individual

amounts in

column (A) by

the amount in

column (B).

Amount

x

=

x

=

Individuals—Use the amounts in column (C) on Part III, line 1, to determine the amount of these deductions that are allowable

after the application of the section 68 limitation.

Estates or trusts—Enter the amounts in column (C) in the appropriate location on lines 9 and 10. Don’t complete Part III or IV

of this worksheet.

Instructions for Form 8960 (2025)

19

Lines 9 and 10—Application of Itemized Deduction Limitations on Deductions Properly Allocable to

Investment Income Worksheet—(continued)

Part III—Application of Section 68 to Deductions Properly Allocable to Investment Income (Individuals Only)

1. Enter the amount of miscellaneous itemized deductions properly allocable to

investment income from column (C) of Part II:

Description

Line

Amount

(a)

(b)

2. Enter the amount of state, local, and foreign income taxes that are properly

allocable to investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Enter the amounts of other itemized deductions subject to the section 68

limitation and properly allocable to investment income before any itemized

deduction limitations (description and Form 8960 line number where they’ll be

reported):

Description

Line

Amount

2.

(a)

(b)

4. Enter the total deductions properly allocable to investment income subject to the section 68 limitation. Enter

the sum of lines 1 through 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Enter the amount of total itemized deductions reported on Form 1040 or

1040-SR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

6. Enter all other itemized deductions allowed but not subject to the section 68

deduction limitation.

4.

(a) Investment interest expense . . . . . . . . . . . . . . . . . . . . .

(b) Casualty losses (other than losses described in section

165(c)(1)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) Medical expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) Gambling losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) Total of lines 6(a) through 6(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6(e).

7. Subtract line 6(e) from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

8. Enter the lesser of line 7 or line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.

This is the amount of itemized deductions that are properly allocable to investment income after the application of the sections 67

TIP and

68 deduction limitations. Use Part IV of this worksheet to reconcile this amount to the individual deduction amounts reported

on Form 8960, lines 9 and 10.

20

Instructions for Form 8960 (2025)

Lines 9 and 10—Application of Itemized Deduction Limitations on Deductions Properly Allocable to

Investment Income Worksheet—(continued)

Part IV—Reconciliation of Schedule A Deductions to Form 8960, Lines 9 and 10 (Individuals Only)

(B)

IF Part III, line 8, is

less than Part III,

line 4, THEN divide

line 8 by line 4

AND enter the

amount in column

(B).

IF the amounts

reported on Part III,

lines 4 and 8, are

equal, THEN enter

1.00 in column (B).

(A)

Re-enter the amounts and descriptions from Part III, lines 1–

3.

Miscellaneous itemized deductions properly

allocable to investment income:

Description

1.

Line

(C)

Multiply the

individual

amounts in

column (A) by the

amount in column

(B). Enter these

amounts in the

appropriate

locations on lines

9 and 10.

Amount

(a)

×

=

(b)

×

=

2. State, local, and foreign income taxes . . . . . . . . . .

Itemized deductions subject to section 68

included on line 3 of Part III:

×

=

3.

(a)

×

=

(b)

×

=

Instructions for Form 8960 (2025)

21

Part III—Tax Computation

Individuals

Individuals complete lines 13–17.

Line 13—Modified Adjusted Gross Income (MAGI)

If you didn’t exclude any amounts from your gross income

under section 911 and you don’t own an interest in a CFC

or PFIC, your MAGI is your AGI as reported on Form 1040

or 1040-SR. If you exclude amounts under section 911 or

own certain CFCs or PFICs, your MAGI is your AGI as

modified by certain rules described in Regulations section

1.1411-10(e)(1).

Section 911. If you exclude amounts from income under

section 911, to calculate your MAGI, you must increase

your AGI by the excess of the amount excluded from

income under section 911(a)(1) over the amount of any

deductions (taken into account in computing AGI) or

exclusions disallowed under section 911(d)(6) for the

amount excluded from income under section 911(a)(1).

Use the Line 13—MAGI Worksheet in these instructions to

compute your MAGI.

CFCs and PFICs. If you own, directly or indirectly, stock

in a CFC or PFIC other than certain CFCs and PFICs held

in a section 1411 trade or business or PFICs marked to

market under section 1296 or any other provision, to

calculate your MAGI, you may need to make certain

adjustments to your AGI, as provided in Regulations

section 1.1411-10(e)(1). Generally, these adjustments

include the following.

• 1291 funds.

1. Increase AGI by the amount of any excess

distributions derived from a PFIC that are dividends

included in MAGI but not included in gross income for

regular income tax purposes.

2. Increase AGI by the amount of any gain treated as

an excess distribution under section 1291 included in

MAGI but not included in gross income for regular income

tax purposes.

• CFCs and QEFs without a section 1.1411-10(g)

election in effect.

1. Decrease AGI by the amount of any section 951(a),

951A, or 1293(a) inclusions.

2. Increase AGI by the amount of any distributions

described in section 959(d) or 1293(c) included in your NII

as a dividend.

3. Increase or decrease AGI (as appropriate) by the

amount of any adjustment to gain or loss on the

disposition of the CFC or QEF that results in an

adjustment to your MAGI.

4. Increase or decrease AGI (as appropriate) by the

amount of any adjustment to gain or loss on the

disposition of an interest in a domestic partnership or S

corporation that holds a CFC or QEF that results in an

adjustment to your MAGI.

5. Increase or decrease AGI (as appropriate) by the

amount of any adjustment to investment interest expense

under Regulations section 1.1411-10(c)(5) that’s taken

into account in computing MAGI.

6. Increase or decrease AGI (as appropriate) by the

amount reported to you in box 14, code H, of

Schedule K-1 (Form 1041) that requires a MAGI

adjustment.

• CFCs and QEFs held in a section 1411 trade or

business or with a section 1.1411-10(g) election in effect.

Increase AGI by the amount of any distributions

described in section 959(d) or 1293(c) included in your NII

as a dividend (not applicable to tax years beginning before

2014).

If you don’t own (directly or indirectly) any

TIP interests in CFCs or PFICs, and don’t exclude any

foreign earned income on Form 2555, Foreign

Earned Income, enter your AGI from Form 1040 or

1040-SR on line 13 of Form 8960.

Line 14—Threshold Based on Filing Status

The threshold amount is based on your filing status.

Line 10—Worksheet for Traders in Financial Instruments That Maintain More Than One Trade or

Business

Use this worksheet to determine the amount on line 10.

1. Enter the total amount from Schedule SE (Form 1040), line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.

2. (a) If the amount on Schedule SE (Form 1040), line 3, is zero or greater, you can’t use the

expenses from your trade or business to reduce your investment income. Stop here.

(b) If the amount on Schedule SE (Form 1040), line 3, is a negative amount, enter your

expenses from your trade or business of trading in financial instruments or commodities

(entered as a positive amount) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2(b).

3. Add line 1 to line 2(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

(a) If the amount on line 3 of this worksheet is zero or less, include the trade or business

expenses (line 2(b) of the worksheet) on Form 8960, line 10.

(b) If the amount on line 3 of this worksheet is a positive number, convert the amount from

Schedule SE (Form 1040), line 3 (line 1 of this worksheet), into a positive number and

include it on Form 8960, line 10.

22

Instructions for Form 8960 (2025)

Line 13—MAGI Worksheet

1. Enter your adjusted gross income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Foreign earned income exclusion:

(a) Enter your foreign earned income exclusion (from

line 42 of Form 2555) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) Enter the deductions reported on line 44 of Form

2555 allocable to your foreign earned income

exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (

1.

)

(c) Combine lines 2(a) and 2(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3. Adjustments for certain CFCs and certain PFICs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

4. Enter the sum of line 1, line 2(c), and line 3. (Enter this amount on Form 8960,

line 13.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

Filing status

Threshold amount

Married filing jointly

$250,000

Qualifying surviving spouse

$250,000

Married filing separately

$125,000

Single or Head of household

$200,000

A bankruptcy estate of an individual enters $125,000

and uses Form 8960, lines 13–17, to compute the tax.

If you’re a U.S. citizen or resident married to an NRA,

your filing status is married filing separately unless you

made an election under section 6013(g) or 6013(h) to file

jointly with your NRA spouse. Note that if you made a

section 6013(g) or 6013(h) election to file jointly with your

NRA spouse, but don’t also elect to apply the joint return

election for NIIT purposes, then, for NIIT purposes, you’ll

file as married filing separately and need to use the

applicable threshold amount. See Election To File Jointly

With Nonresident Spouse, earlier.

Line 17—Net Investment Income Tax for

Individuals

• Form 1040 or 1040-SR filers: Include this amount on

Schedule 2 (Form 1040), line 12.

• Form 1040-NR filers: Include this amount on the line of

your U.S. residency statement corresponding to Schedule

2 (Form 1040), line 12, and see the Instructions for Form

1040-NR for the amount to report on your tax return.

See Dual-status individual, earlier.

Estates and Trusts

Estates and trusts complete lines 18–21.

Line 18b—Deductions for Distributions of Net

Investment Income and Charitable Deductions

The undistributed NII of an estate or trust (reported on

line 18c) equals its NII (reported on line 18a) reduced by

the NII included in the distributions to beneficiaries

deductible by the estate or trust under section 651 or 661,

and by the NII for which the estate or trust was entitled to a

Instructions for Form 8960 (2025)

section 642(c) deduction, in each case as calculated

under Regulations section 1.642(c)-2 and the allocation

and ordering rules under Regulations section 1.662(b)-2.

In the case of the S portion of an ESBT, as defined by

section 1361(e), NII is further reduced by the NII for which

the trust was entitled to a section 170 deduction. See

section 641(c)(2)(E).

Regulations section 1.1411-3(e) applies the class

system of income categorization, generally embodied in

sections 651 through 663 and related regulations, to arrive

at the trust’s NII reduction in the case of distributions that

are comprised of both NII and net excluded income items.

See Regulations section 1.1411-3(e) for more information

and examples on the calculation of undistributed NII.

Charitable deduction. Report the amount of NII

distributed to beneficiaries of the estate or trust and the

amount of NII allocated to distributions to charity under

section 642(c). The amount of the deduction for NII

distributed to charities under section 642(c) is the amount

of the NII allocated to the charity in accordance with

Regulations section 1.642(c)-2(b) and the allocation and

ordering rules under Regulations section 1.662(b)-2. In

the case of the S portion of an ESBT, as defined by

section 1361(e), report the amount of NII distributed to

beneficiaries of the estate or trust and the amount of NII

allocated to distributions to charity under section 170. See

section 641(c)(2)(E).

Form 1041, Schedule A, can be used as a

TIP worksheet to calculate the amounts of NII

allocable to charitable distributions by including on

line 2 both tax-exempt income and the difference between

adjusted total income and the trust’s NII (Form 8960,

line 18a).

The amount of the deduction for NII distributed to

TIP beneficiaries should equal the sum of NII reported

to the beneficiaries on their respective Schedules

K-1 (Form 1041).

Note: In general, the deduction for distributions of NII

may not exceed the taxable income distributed to the

beneficiary for regular income tax purposes. However, in

the case of an estate or trust that owns an interest in

certain CFCs or PFICs, the distribution of NII can exceed

23

the distribution of taxable income when the amount of

distributions exceeds distributable net income for regular

income tax purposes.

Form 1041, Schedule B, can be used as a

TIP worksheet to calculate the income distribution

deduction for NIIT purposes by replacing line 1

with the trust’s NII (Form 8960, line 18a) and including on

line 2 both adjusted tax-exempt interest and the difference

between line 1 and the trust’s NII (Form 8960, line 18a).

Line 18c—Undistributed Net Investment Income

Don’t enter a negative number. If negative, enter zero.

Line 19a—Adjusted Gross Income (AGI)

If the estate or trust doesn’t own an interest in a CFC or

PFIC, enter its AGI for regular income tax purposes.

If the estate or trust owns an interest in a CFC or PFIC,

it may need to make adjustments. See Line 13—Modified

Adjusted Gross Income (MAGI), earlier.

Line 19b—Highest Tax Bracket for Estates and

Trusts

See the instructions for Form 1041, Schedule G, line 1a,

and the instructions for Form 1041-QFT, line 12, for the

dollar amount at which the highest tax bracket begins for

the tax year and enter that amount here.

In the case of a QFT, see Special computational rules

for qualified funeral trusts (QFTs), earlier, to determine the

amount to report on Form 8960, line 19b.

Line 21—Net Investment Income Tax for Estates

and Trusts

• Form 1041 filers: Include this amount on Form 1041,

Schedule G, line 5, and see the instructions there.

• Form 1041-QFT filers: Include this amount on Form

1041-QFT, line 15, and see the instructions there.

Paperwork Reduction Act Notice. We ask for the

information on this form to carry out the Internal Revenue

24

laws of the United States. You are required to give us the

information. We need it to ensure that you are complying

with these laws and to allow us to figure and collect the

right amount of tax.

You are not required to provide the information

requested on a form that is subject to the Paperwork

Reduction Act unless the form displays a valid OMB

control number. Books or records relating to a form or its

instructions must be retained as long as their contents

may become material in the administration of any Internal

Revenue law. Generally, tax returns and return information

are confidential, as required by section 6103.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

average time is:

Recordkeeping . . . . . . . . . . . . . .

Learning about

the law or the form . . . . . . . . . . .

Preparing the form . . . . . . . . . . .

Copying, assembling,

and sending the form

to the IRS . . . . . . . . . . . . . . . . . .

1 hr., 01 min.

6 hr., 04 min.

1 hr., 47 min.

20 min.

Comments and suggestions. We welcome your

comments about this publication and your suggestions for

future editions.

You can send us comments through IRS.gov/

FormComments. Or you can write to:

Internal Revenue Service

Tax Forms and Publications

1111 Constitution Ave. NW, IR-6526

Washington, DC 20224.

DO NOT SEND THE FORM TO THIS ADDRESS.

Although we can’t respond individually to each

comment received, we do appreciate your feedback and

will consider your comments as we revise our tax forms,

instructions, and publications. We can’t answer tax

questions sent to the above address.

Instructions for Form 8960 (2025)

Index

D

Deduction recoveries 14

Definitions 1

Disposition of Interest 5

Disposition of Property, gains and

losses 8

E

Economic Grouping 5

Election for Reg 1.1411–10(g) 6

Election, Form 8814 13

Elections for Investment

Income 7

Estates and Trusts, application of

Net Investment tax 3

Expenses of Investments 16

I

Income Threshold, Estates and

Trusts 23

Income Thresholds,

Individuals 22

Index 25

Individuals, application of Net

Investment tax 2

Instruments or Commodities 6, 7

J

Joint-filed returns 2

M

Mark-to-market, Passive Foreign

Investment Company 12

P

Passive Activity 4

R

Recordkeeping 2

S

Section 1291 12

Section 1411 Net Operating

Loss 13

Self-charged Interest 16

T

Tax Computation 22

25