Net Investment Income Tax (NIIT) Calculator
Calculate the 3.8% Net Investment Income Tax that applies to investment income for high-income individuals.
Calculate NIIT
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Net Investment Income
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How It Works
The Net Investment Income Tax is a 3.8% surtax on investment income for taxpayers with modified AGI above certain thresholds.
NIIT Thresholds
| Filing Status | Threshold |
|---|---|
| Single | $200,000 |
| Married Filing Jointly | $250,000 |
| Married Filing Separately | $125,000 |
| Head of Household | $200,000 |
Formula
NIIT = 3.8% × min(Net Investment Income, MAGI - Threshold)
What Counts as Net Investment Income?
- Interest, dividends, capital gains
- Rental and royalty income
- Passive business income
- NOT wages, self-employment income, or active business income
Examples
Example: Single, $300k MAGI, $50k NII
Over threshold: $300k - $200k = $100k
Subject to NIIT: min($50k, $100k) = $50k
NIIT: $50,000 ×
3.8% = $1,900
Frequently Asked Questions
Is NIIT the same as Additional Medicare Tax?
No. NIIT (3.8%) applies to investment income. Additional Medicare
Tax (0.9%) applies to wages and self-employment income. Different income types, different
taxes.
Does NIIT apply to my 401k distributions?
Generally no. Distributions from qualified retirement accounts like
401k and IRA are not net investment income. They are taxed as ordinary income.
What about rental income?
Passive rental income is generally subject to NIIT. However, if
you're a real estate professional materially participating, it may not be.
Can I reduce NIIT?
Strategies include: tax-loss harvesting to reduce capital gains,
municipal bonds (tax-exempt interest), and maximizing deductions to lower MAGI.
Are the thresholds adjusted for inflation?
No. The NIIT thresholds ($200k/$250k/$125k) have remained the same
since the tax was enacted in 2013. They are not indexed for inflation.
How is NIIT paid?
Report NIIT on Form 8960 and pay with your annual return. It may
need to be included in estimated tax payments to avoid underpayment penalties.
Use Cases
- Determine whether your investment income triggers the 3.8% NIIT surtax for the current tax year.
- Estimate your total NIIT liability before year-end to adjust estimated tax payments.
- Compare NIIT exposure across different filing statuses (e.g., Single vs. Married Filing Jointly).
- Plan asset sales and capital gains realization to stay below MAGI thresholds.
- Evaluate the combined tax cost of investment income including NIIT alongside capital gains tax.
Assumptions & Limitations
- The NIIT rate is a flat 3.8% and thresholds are not adjusted for inflation ($200k Single, $250k MFJ, $125k MFS).
- This calculator covers federal NIIT only; state-level surtaxes on investment income are not included.
- Net investment income includes interest, dividends, capital gains, rental, and passive income but excludes wages, Social Security, and active business income.
- Deductions allocable to investment income (e.g., investment interest expense) may reduce NII but are not modeled here.
- Tax-exempt interest from municipal bonds is excluded from both MAGI and NII for NIIT purposes.
- This tool provides estimates for educational purposes only and does not constitute tax advice. Consult a qualified tax professional for your specific situation.
Sources & References
- IRC Section 1411 - Imposition of Tax on Net Investment Income
- IRS Form 8960 Instructions - Net Investment Income Tax
- IRS Topic No. 559 - Net Investment Income Tax
- IRS Questions and Answers on the Net Investment Income Tax
- IRS - Net Investment Income Tax Overview
Tax laws change frequently. Always verify current rates and thresholds on IRS.gov before making financial decisions.