Assuring Medicare’s Promise Act of 2025
The Assuring Medicare’s Promise Act of 2025 would change how the Net Investment Income Tax (NIIT) interacts with Medicare’s funding and who pays it. First, it would place NIIT receipts into the Federal Hospital Insurance Trust Fund (the Medicare HI trust fund), rather than treating NIIT as a separate or standalone levy. This change would apply to tax years beginning after December 31, 2025. Second, for high-income individuals, the bill would expand and retool how NIIT is calculated. It would raise income thresholds for when NIIT applies, substitute a broader measure called “specified net income” (instead of only net investment income) in determining NIIT, and include a phase-in mechanism to dampen large, immediate tax increases. The bill would also extend NIIT-type rules to trusts and estates and make several definitional clarifications (including treatment of foreign income and previously taxed income) with the same 2025+ effective date. Overall, the measure aims to increase Medicare funding and widen the NIIT base for high earners while introducing transitional protections.
Key Points
- 1Inclusion of NIIT in the Hospital Insurance Trust Fund: The NIIT would be counted as taxes reported to the Treasury for the Medicare Part A (HI) trust fund, effectively tying NIIT receipts directly to Medicare financing. Effective for taxable years beginning after 2025.
- 2Higher-income NIIT application: The bill adds a new subsection to the NIIT rules (Section 1411(f)) that applies NIIT to certain high-income individuals by using the greater of “specified net income” or “net investment income” in calculating the tax, instead of net investment income alone.
- 3Raised and tiered income thresholds: High-income threshold amounts would be set at $400,000 for individuals, $500,000 for joint filers or surviving spouses, and half those amounts for married filing separately. These thresholds determine who is subject to the enhanced NIIT.
- 4Phase-in of the increased tax: The increase in NIIT from applying the higher threshold and broader base would be phased in, so the higher tax does not jump to its full amount immediately. The phase-in scales the increase based on how much the excess over the threshold would otherwise raise the tax (with a specified cap mechanism).
- 5Expanded base: “Specified net income” broadens what counts toward NIIT. It is defined to include more income categories and to treat certain items differently from the current NIIT base, including adjustments related to passive activity income rules. It also includes considerations for foreign income and certain previously taxed income.
- 6Trusts and estates: The NIIT would also apply to trusts and estates by using the greater of undistributed specified net income or undistributed net investment income, instead of the current undistributed net investment income alone.
- 7Clarifications and foreign income: The bill includes clarifications to exclude certain wages (such as wages subject to Social Security/Medicare taxes) from net investment income, and it expands inclusion of certain foreign income (e.g., income includible under sections 951, 951A, 1293, or 1296) into the NIIT base. It also provides guidance on how to handle distributions of previously taxed income.
- 8Effective date and transition: All changes would apply to tax years beginning after December 31, 2025, with a transition rule to coordinate how pre-2026 and post-2025 years interact under the new rules.