Net Investment Income (NII) is an income received from investment assets and activity, before taxes. It applies to the income earned, not the capital gains or losses. It is important to differentiate between NII and income derived from employment. NII includes income generated from interest, dividends, capital gains, rents or royalties.

When it comes to individuals, the NII tax applies when their NII and MAGI (modified adjusted gross income) surpass certain thresholds. Those who earn too much money could be subject to a 3.8% tax on top of the regular income tax rates. For estates and trusts, the NII tax applies when the undistributed NII exceeds the dollar amount at which the highest tax bracket begins, plus their annual adjusted gross income.

When it comes to investment funds, companies should subtract the operating expenses from total investment income in order to generate the NII figure. This allows the business to determine what income is left after the expenses have been taken care of.

The NII tax was introduced in 2013 under the Affordable Care Act in order to raise revenue for the act. Though controversial, it is still in effect today. It is important to note that the NII tax only applies to certain individuals, estates and trusts that meet the thresholds for income and MAGI for the specific tax year.

Overall, NII is an important concept for businesses and individuals alike. It allows businesses to measure their income from investments and determine what funds will be left after expenses. It also gives insight into how much a person or business will have to pay in taxes depending on their level of investment income.