Net Investment Income Tax (NIIT)

The Affordable Care Act includes an additional Medicare tax in the form of a 3.8% Net Investment Income Tax (NIIT) on some net investment income of individuals, estates, and trusts that have income above the statutory threshold amounts.

Be sure not to overlook this new tax. Americans abroad who fall into the categories referred to will owe the tax to the US since foreign tax credits are not applicable against this tax.

This new tax leads to pure double taxation of those Americans resident abroad since foreign tax credits cannot be applied against this tax due to a simple drafting technicality. ACA, Inc. urges Congress to apply tax fairness on Obamacare and allow foreign tax credits against the additional Medicare tax. December 2013 ACA, Inc. Press Release

Virginia La Torre Jeker, member of the ACA, Inc. Professional Tax Advisory Council has written a detailed blog about how the new NIIT tax will affect Americans Abroad (February 2014) "NIIT-Picky Nuances for Americans Overseas or With Offshore Investments"