What type of income is not typically included when determining Net Investment Income Tax obligations?

When determining Net Investment Income Tax (NIIT) obligations, income from retirement accounts is typically not included. This is because distributions from retirement accounts, such as 401(k)s or IRAs, are taxed differently and may not qualify as net investment income under the criteria set by the IRS.

The NIIT is primarily focused on investment income, which includes dividends, interest income, and capital gains from the sale of assets. For instance, dividend income from stocks and interest income from bonds are both forms of investment income that contribute to NIIT calculations. Similarly, capital gains generated from asset sales are also considered when evaluating a taxpayer's investment income for the tax.

In contrast, income from retirement accounts is usually not counted because it might already be subject to different tax rules and potentially pre-tax contributions, meaning it doesn't fit within the traditional definitions of net investment income outlined for the NIIT.