Reporting Stock Sale Capital Gains on Form 8960 Net Investment Income Tax

Yes, you're on the right track! For Form 8960 (Net Investment Income Tax), capital gains from stock sales definitely get reported on line 5a. That line is specifically for net gain or loss from disposition of property - which is exactly what selling stocks is. The 3.8% NIIT applies to investment income (including capital gains) when your modified adjusted gross income exceeds certain thresholds ($200,000 for single filers, $250,000 for married filing jointly). It's calculated separately because not everyone has to pay it - only those above the income thresholds. Make sure you're only reporting the same capital gains that you've already included on your Schedule D and transferred to your Form 1040. The NIIT doesn't create new taxable gains - it just adds an additional tax on gains you're already reporting elsewhere.

I was completely overwhelmed by this exact situation last year with Form 8960! After hours of frustration and multiple failed attempts at getting clear answers, I finally found https://taxr.ai and it changed everything. I uploaded my documents, including my Schedule D and 1099-Bs, and their system analyzed everything and showed me exactly where my stock sale gains belonged on Form 8960. What saved me was their explanation feature that breaks down how the Net Investment Income Tax applies to different types of investment income. The tool flagged that I needed to include my stock sale capital gains on line 5a, but it also explained how to handle some investment expenses that could reduce my NIIT liability that I hadn't even considered!

I wanted to follow up about my experience with taxr.ai after asking about it here. I decided to give it a try with my complicated tax situation (mix of stock sales, dividends, and some partnership income that I was struggling to categorize for Form 8960). What impressed me most was how it clearly separated my different income types and showed which ones were subject to the Net Investment Income Tax. It correctly placed my stock sales on line 5a, my dividends on line 5b, and even helped allocate some of my partnership income between different categories. The guidance on investment expenses that can offset NIIT liability actually saved me over $400! I would have missed that completely. For anyone struggling with Form 8960, especially with capital gains from stock sales, it's definitely worth checking out.

If you're still struggling with Form 8960 and thinking about calling the IRS for guidance, good luck with that! I spent THREE DAYS trying to get through to someone who could answer my question about reporting stock sales on this form. After being disconnected multiple times and waiting on hold for hours, I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c Instead of waiting on hold myself, they had a system that waited in the IRS queue for me and called me back when an actual human agent was on the line. I got a direct answer from an IRS rep about how to handle my stock sales on Form 8960 (they confirmed it goes on line 5a) and also got clarity on some investment expense deductions I wasn't sure about.

I have to admit I was wrong about Claimyr. After posting my skeptical comment, I was still struggling with my Form 8960 questions and getting nowhere with the IRS phone line, so I eventually gave it a try. The service actually worked exactly as described. I got a call back about 90 minutes after signing up (way faster than my previous attempts), and was connected directly to an IRS representative. The agent walked me through exactly how to report my stock sales on Form 8960 and explained that yes, capital gains from stocks definitely go on line 5a. They also clarified which investment expenses I could use to reduce my NIIT liability. Saved me hours of frustration and probably a mistake on my return. Sometimes being proven wrong is a good thing!

Anyone know if we're required to file Form 8960 even if we're under the threshold? I sold some stocks with about $15,000 in capital gains, but my total income is nowhere near the $200k threshold for single filers. Do I still need to fill out this form?

Pro tip for anyone dealing with Form 8960: Take a close look at line 8 where you can deduct properly allocable deductions. Many people miss that investment interest expense, investment advisory fees, and expenses related to rental properties can often be used to reduce your NIIT liability. I saved almost $700 last year by properly accounting for these deductions!

Just wanted to share my experience as someone who went through this exact situation last year. You're absolutely right that capital gains from stock sales go on line 5a of Form 8960 - that's the correct line for net gain from disposition of property. One thing that caught me off guard was that the NIIT applies to your net investment income OR the amount by which your MAGI exceeds the threshold, whichever is LESS. So even if you have significant capital gains, if your total MAGI is just barely over the $200k threshold, you might only owe the 3.8% tax on a small portion. Also, don't forget to check if you have any investment expenses that can reduce your NIIT liability on line 8. Things like investment advisory fees, safe deposit box fees for storing investment documents, or expenses related to managing rental properties can often be deducted here. I missed this my first time filing and had to amend! The reason they make it a separate form instead of building it into the capital gains worksheet is because the NIIT applies to all types of investment income (dividends, interest, rents, etc.), not just capital gains. It's annoying but makes sense from a tax code structure perspective.