# Instructions for Form 8960

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

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
2

• 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,
3

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.

4

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.
5

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/
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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A834cae57f876564f. Public record. Not legal advice.