1. What Is Net Investment Income?

Net Investment Income (NII) represents the total income generated from investments after deducting related expenses. It includes interest income, dividend income, and rental income minus any investment-related costs.

2. How Does The Calculator Work?

The calculator uses the NII formula:

Where:

• \( \text{Interest Income} \) — Income from interest-bearing investments (bonds, savings accounts, CDs)
• \( \text{Dividend Income} \) — Income from stock dividends and distributions
• \( \text{Rental Income} \) — Income from rental properties and real estate investments
• \( \text{Expenses} \) — Investment-related costs (management fees, maintenance, taxes)

Explanation: This calculation provides a comprehensive view of investment performance by considering all income sources and associated costs.

3. Importance Of NII Calculation

Details: Calculating NII is essential for investment portfolio analysis, tax planning (especially for Net Investment Income Tax), and evaluating the true profitability of investment strategies.

4. Using The Calculator

Tips: Enter all income and expense amounts in USD. Ensure values are accurate and include all relevant investment income and associated costs for a complete calculation.

5. Frequently Asked Questions (FAQ)

Q1: What types of income are included in NII?
A: NII includes interest, dividends, rents, royalties, annuities, and net capital gains from investment activities.

Q2: What expenses can be deducted from investment income?
A: Deductible expenses include investment advisory fees, custodial fees, legal and professional fees, and other expenses directly related to investment activities.

Q3: How is NII different from total investment return?
A: NII focuses on income generated, while total return includes both income and capital appreciation. NII excludes unrealized gains/losses.

Q4: Who pays Net Investment Income Tax?
A: Individuals with modified adjusted gross income above certain thresholds ($200,000 single, $250,000 married) may be subject to an additional 3.8% NIIT.

Q5: Can NII be negative?
A: Yes, if investment expenses exceed investment income, resulting in negative NII, which may be used to offset other income for tax purposes.