Certified Financial Planner (CFP) Tax Planning 2025 – 400 Free Practice Questions to Pass the Exam

The 3.8% net investment income tax (NIIT) is triggered specifically by modified adjusted gross income (MAGI) exceeding certain thresholds. For unmarried individuals, this threshold is set at $200,000. When their MAGI surpasses this amount, they become subject to the net investment income tax on the lesser of their net investment income or the amount by which their MAGI exceeds the threshold.

The criteria for triggering the tax focus on income levels, particularly for high earners, which is why the correct scenario involves unmarried individuals meeting the specified MAGI threshold. This tax specifically applies to individuals with investment income, which includes dividends, interest, capital gains, rental income, and other forms of passive earnings.

Understanding this threshold is crucial for anyone involved in financial planning or tax strategy since exceeding the MAGI limit brings about additional tax responsibilities. The other options either involve income levels that do not meet the NIIT requirements or describe situations that do not trigger the tax. For instance, married couples with MAGI under $250,000 would not be liable, and individuals with wages only typically do not incur this investment tax unless they also have investment income that brings them above the threshold.