Which of the following taxes is applied based on modified adjusted gross income (MAGI)?

The net investment income tax is applied based on modified adjusted gross income (MAGI). This tax is relevant for higher-income taxpayers, specifically those whose MAGI exceeds certain thresholds. The net investment income tax is an additional 3.8% tax applied to the lesser of one’s net investment income or the amount of MAGI that exceeds the specified threshold. This means that the calculation of this tax begins with determining MAGI, which includes wages, interest, dividends, capital gains, and other income sources, effectively gauging tax liability on investment income.

On the other hand, the other options do not utilize MAGI as a basis for their function. Simple interest is a method of calculating interest based solely on the principal amount, while capital gains tax applies to the profit from the sale of assets, with specific rates based on how long the asset was held rather than income levels. Tax loss harvesting is a strategy used to offset tax liabilities by selling losing investments but does not depend on income calculations. Understanding the context of how different taxes are applied helps in navigating tax implications related to investments.