NIIT: Net Investment Income Tax (2024)
Minnesota · Minnesota DOR · Used for tax years 2024
Minnesota Schedule NIIT calculates net investment income and any Minnesota net investment income tax for individuals, estates, and trusts. It uses investment income and deductions from federal Form 8960, applies Minnesota adjustments, and reports the tax to include on Form M1 or
Who files this form
For tax year 2024, you must complete Schedule NIIT if you are an individual, estate, or trust taxpayer with over $1,000,000 of investment income. Completing the schedule determines whether you owe Minnesota net investment income tax.
- Individuals complete Parts 1 and 2.
- Estates and trusts complete Parts 1 and 3.
- The tax does not apply to corporate taxpayers.
If you are a nonresident alien of the United States who is not subject to federal net investment income tax, you may still be subject to Minnesota's tax. Complete a pro-forma federal Form 8960 and include it with Schedule NIIT.
What you'll need
Have these forms and details available, as applicable:
- Federal Form 8960: Schedule NIIT uses total investment income from line 8 and deductions and modifications from line 11.
- Taxpayer identification: Your name, FEIN, SSN, or ITIN, and Minnesota Tax ID.
- Form M1 or Form M2: Schedule NIIT is included with your return.
- Class 2a property information: The property tax statement for the year of disposition can identify the property's classification. You may also contact the county assessor.
- Flow-through schedules: Class 2a gains may be identified on Schedules KPI and KS, lines 21 and 22; Schedule KPC, lines 23 and 24; or Schedule KF, lines 30 and 31. U.S. bond interest may be identified on Schedules KPI and KS, line 14; Schedule KPC, line 17; or Schedule KF, line 16.
- Minnesota allocation calculation: Include an attachment showing the calculation for line 13 or line 21, as applicable.
- Estate or trust distribution amounts: Line 17 asks for the amount of net investment income distributed to beneficiaries or charities.
How to file
Include Schedule NIIT as a supplemental schedule with Form M1 or Form M2.
- Individuals: Report the tax from Schedule NIIT, line 15, on Form M1, line 14.
- Estates and trusts: Report the tax from Schedule NIIT, line 23, on Form M2, line 12.
Do not include Schedule NIIT with Form M3 or Form M8. Partners or shareholders electing composite income tax or pass-through entity (PTE) tax to satisfy their filing requirement must file Schedule NIIT with Form M1. In these situations, Form M1 reports only the net investment income tax on line 14, with no other tax lines or tax benefits.
Common mistakes
- Counting deductions twice: Reduce line 6 by deductions already included in the calculation for line 3.
- Including ineligible bond income on line 3: Do not include interest or dividends attributable to Ginnie Mae, Fannie Mae, or Freddie Mac bonds.
- Exceeding line limits: Neither line 2 nor line 3 may exceed line 1. Line 7 may not exceed either line 2 or line 6.
- Continuing when no tax applies: Stop if line 11 or line 19 is zero or less. You are not subject to Minnesota net investment income tax.
- Missing allocation details: Include the required calculation attachment for line 13 or line 21. Carry the allocation ratio on line 14 or line 22 to five decimal places.
- Not accounting for the tax in payments: If you expect to owe this tax, adjust income tax withholding or estimated payments to account for the increase and avoid underpayment penalties.
Questions people ask
What is the Minnesota net investment income tax rate?
The rate is 1%. Individuals apply it to the amount on line 10 above $1,000,000, then apply the Minnesota allocation ratio. Estates and trusts apply it to undistributed net investment income on line 18 above $1,000,000, then apply their Minnesota allocation ratio.
Can gains from agricultural property be excluded?
Line 2 excludes net gains included in federal Form 8960, line 8, from dispositions of Minnesota class 2a property. If a property has multiple classifications and the county assessor can practically separate the acreage, only the acreage attributable to class 2a may be excluded.
How do individuals allocate income to Minnesota?
Minnesota residents allocate 100% of income to Minnesota. Part-year residents and nonresidents use the guidance for Schedule M1NR, lines 1 through 8, to determine the amount allocated to Minnesota.
Does paying composite income tax or PTE tax replace Schedule NIIT?
No. Partners or shareholders electing those taxes to satisfy their filing requirement must file Schedule NIIT with Form M1. Composite income tax or PTE tax can still satisfy their tax on the distributive share of the entity's business income.