Purpose of Form

Use Form 8960 to figure the amount of your Net Investment Income Tax (NIIT).

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).

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).

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.

Instructions for Form 8960 (2025) Catalog Number 53783S Feb 4, 2026 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).