Net Investment Income Tax (NIIT)
“High earners need to know about this surtax.
Single filers with a modified adjusted gross income (MAGI) over $200,000 and those married filing jointly with a MAGI over $250,000 could be subject to this surtax.
This 3.8% tax applies to whichever is lower: your net investment income or the amount by which your MAGI exceeds the threshold.
Tax-efficient financial planning could help soften the blow of NIIT.”
“Many investors are familiar with regular income tax and capital gains tax, but if your modified adjusted gross income (MAGI) goes above a certain point, you could owe an additional net investment income tax (NIIT). Understanding how it works could help you determine whether it applies to you—and if it does, how to potentially reduce or avoid it.
What is net investment income tax (NIIT)?
“Net investment income tax is the 3.8% additional tax some high earners and estates must pay on investment gains. That could translate to a hefty tax bill if you don’t strategize to minimize the burden. If NIIT sounds new to you, that could be because it’s only been around since 2013, when it was implemented to help fund health care policy changes.”
What counts as net investment income (NII)?
Most types of taxable investment income fall into this bucket.
What doesn’t count as net investment income (NII)?
Wages, bonuses, Social Security benefits, life insurance payouts, and unemployment benefits don’t count as net investment income (NII). The following types of investment income are generally excluded from NIIT as well:
Qualified withdrawals from 401(k), IRA, and other retirement accounts.
Excluded gains from selling a primary residence: up to $500,000 for married filing jointly
Income from a business that you actively participate in
Whether you’ll pay this tax depends on your filing status and your MAGI. For the 2025 and 2026 tax years, individuals owe NIIT if they received net investment income and their MAGI exceeds the following levels:
Single or head of household: $200,000
Married filing jointly or qualified surviving spouse: $250,000
Married filing separately: $125,000