Net Investment Income

What Does Net Investment Income Mean?

Net investment income refers to the returns generated from securities, such as stocks and bonds, after deducting operational and administrative expenses. This concept comes up often when evaluating insurance products that carry an investment component, such as annuities, where the income paid out to the holder depends partly on how the underlying portfolio performs.

Insuranceopedia Explains Net Investment Income

Net investment income applies to anyone holding securities in their investment portfolios, whether individuals or companies. It also applies to the cash value built up inside policies like indexed universal life insurance, which can accumulate taxable returns over the years.

The IRS taxes this income differently from salaries and other sources of income. Anyone receiving investment income is required to file Form 8960 when submitting their taxes.