U.S. · Form 8960 line 9b
Form 8960 line 9b state, local, and foreign income tax.
The part of your taxes that reduces net investment income for the 3.8% tax.
Line 9b is state, local, and foreign income tax you paid for the year that is attributable to net investment income, plus state, local and foreign real property taxes and state and local personal property taxes attributable to it. Sales taxes are not deductible here, and foreign income tax is out if you took a credit for it. You split mixed taxes with any reasonable method.
Allocate a tax to net investment income
Result
What counts on line 9b
| Item | Line 9b treatment (2025 instructions) |
|---|---|
| State, local and foreign income taxes | Include the amount paid for the tax year that is attributable to net investment income. |
| Real property taxes | Include state, local and foreign real property taxes paid for the year, to the extent attributable to net investment income. |
| Personal property taxes | Include state and local personal property taxes paid, to the extent attributable to net investment income. |
| Sales taxes | Not deductible in computing net investment income. |
| Foreign income tax with a credit | No deduction for any foreign income taxes if you took a credit for any portion of them (section 275(a)(4)). |
| Form 1040-NR filers | Include only taxes paid for the U.S. residency period of the tax year. |
How the allocation works
The instructions let you allocate a tax between investment income and other income with any reasonable method, and point to a ratio of net investment income to gross income as one reasonable example. Whatever amount you allocate to net investment income goes on line 9b. It then joins line 9a (investment interest expense) and line 9c (miscellaneous investment expenses) on line 9d, and line 11 adds line 10 to get total deductions and modifications that reduce line 8 into line 12.
The instructions also say total taxes may be limited under section 164(b)(6) when the expense is not tied to a trade or business or a section 212 activity, and send you to the Instructions for Schedule A (Form 1040) for the limits on state and local taxes.
Worked example
The IRS example is an unmarried U.S. citizen with $100,000 of wages and $60,000 of Schedule E net rental income, so total income is $160,000. The Schedule E income is about 38% of that, and $10,000 of state and local income tax reported on Schedule A is allocated 38% ($3,800) to net investment income and 62% to wages, which are not subject to the tax. Net investment income becomes $56,200. The calculator uses the unrounded ratio (60,000 / 160,000 = 37.5%), so it returns $3,750 for the same facts; both are illustrations of a reasonable method, not required figures.
What this page does not do
It does not decide whether a tax is deductible on Schedule A or apply the limit on state and local taxes. It does not cover line 9a or line 9c; the instructions say miscellaneous itemized deductions are terminated, so most investment fees are not deductible in figuring net investment income. For the tax computation itself, see the NIIT calculator.
Sources
- Instructions for Form 8960 (2025): Line 9b text, the reasonable-method allocation example and the section 164(b)(6) and 275(a)(4) notes. Read November 2, 2026.
- Form 8960 (2025): The exact wording of lines 9a to 11. Read November 2, 2026.
These are the tax year 2025 edition instructions and forms (published for returns filed in 2026). The IRS revises them each year, so thresholds, line numbers and limits can change; check the current edition before relying on a figure.
Frequently asked questions
What goes on Form 8960 line 9b?
State, local and foreign income taxes paid for the year that are attributable to net investment income, plus state, local and foreign real property taxes and state and local personal property taxes attributable to it.
Are sales taxes included on line 9b?
No. The instructions say sales taxes are not deductible in computing net investment income.
Can I include foreign income tax if I took the foreign tax credit?
No. You may not take a deduction for any foreign income taxes paid for the tax year if you took a credit for any portion of them.
How do I split a tax between investment income and other income?
Use any reasonable method. The instructions illustrate allocating by the ratio of net investment income to gross income.
What if I file Form 1040-NR?
Include only taxes paid for the U.S. residency period of the tax year.
Not tax or legal advice
This page summarizes IRS instructions and is not tax, legal or financial advice. A CPA, enrolled agent or the IRS can confirm what applies to your situation. Everything runs in your browser; nothing you enter is sent anywhere.