Investment tax
What is the Net Investment Income Tax?
The NIIT is a 3.8% surtax created by the Affordable Care Act under IRC §1411. It hits investment income — capital gains, dividends, taxable interest, rental and royalty income, and passive business income — once your modified adjusted gross income clears a threshold. It is reported on Form 8960 and sits on top of your regular income tax and capital-gains tax.
The "lesser of" rule is what trips people up
You do not pay 3.8% on all your investment income, nor on your whole MAGI. The tax applies to the smaller of: (a) your net investment income, or (b) the amount your MAGI exceeds the threshold. So a modest amount over the line caps your NIIT, even with large investment income.
| Filing status | 2026 MAGI threshold |
|---|---|
| Single / Head of household | $200,000 |
| Married filing jointly | $250,000 |
| Married filing separately | $125,000 |
These thresholds are written into the statute and are not adjusted for inflation, so more taxpayers cross them each year. Source: IRC §1411 and IRS Form 8960 instructions.
Strategies that reduce NIIT
Because the tax keys off both investment income and MAGI, you can attack either side: harvest capital losses to shrink net investment income, spread large gains across years, use tax-advantaged accounts (401(k)/IRA growth is exempt), and time Roth conversions carefully — a conversion can push other income over the threshold. See how gains interact with this surtax in the capital gains tax calculator, and model conversions with the Roth conversion tax calculator.
The NIIT is separate from the 0.9% Additional Medicare Tax on wages. To understand your overall rate, use the effective tax rate calculator and marginal tax rate calculator.
Questions
NIIT Calculator 2026 FAQ
Who pays the 3.8% Net Investment Income Tax?
Taxpayers whose modified adjusted gross income exceeds $200,000 (single or head of household), $250,000 (married filing jointly), or $125,000 (married filing separately), and who have net investment income. If your MAGI is under the threshold, you owe no NIIT regardless of how much investment income you have.
What counts as net investment income?
Capital gains, dividends, taxable interest, rental and royalty income, non-qualified annuity income, and income from passive businesses. Wages, self-employment income, Social Security, and distributions from qualified retirement plans are not net investment income, though they can raise your MAGI.
How is the NIIT calculated?
It is 3.8% of the smaller of (a) your net investment income, or (b) the amount your MAGI exceeds the threshold for your filing status. Taking the lesser of the two means a small amount over the threshold limits your NIIT even when investment income is large.
Are the NIIT thresholds adjusted for inflation?
No. The $200,000 / $250,000 / $125,000 thresholds are fixed in the statute and have never been indexed to inflation since the tax began in 2013. As incomes rise, more taxpayers are pulled over the line each year.
- Sources: IRC §1411 · IRS Form 8960 instructions (Net Investment Income Tax) · IRS Q&A on the Net Investment Income Tax.
- 🔄 Last updated June 27, 2026 · Tax year 2026
Disclaimer: Educational estimate, not tax advice; the operator is not a CPA. MAGI for NIIT has specific adjustments (e.g. foreign income) this tool does not model. Confirm your figures with a tax professional.
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